Russian Railways to Acquire Shares in Transport Company Gefco
In a significant move, PSA Peugeot Citroën has entered into exclusive negotiations with Russian Railways (RZD) to sell a majority stake in its logistics news provider, Gefco. The new majority shareholder of Gefco is expected to be the GPI Group, with the sale of the 75% stake set to be officially completed by the end of 2025.
At a press conference, Gefco's president Luc Nadal stated that the company would work well under a foreign logistics news provider. The purchase of Gefco by RZD is considered a potential 'one-time opportunity' for RZD, as the company already has controlling stakes in the intermodal provider Transcontainer and the finished vehicle rail provider RailTransAuto.
The agreement is subject to antitrust authorities and will require consultation with Gefco's works council. RZD aims to increase cargo turnover by 28% in both Russian and external markets by 2015 compared to 2009.
Gefco, which had record profits in 2011, is set to become the exclusive fourth-party logistics news provider for General Motors in Europe and Russia. This may involve absorbing many of the current Opel/Vauxhall logistics management staff. However, the management of Gefco, including Luc Nadal, will not change under the new ownership.
The sale is expected to be for €800m ($1.03 billion), after Gefco pays PSA €100m in a special dividend. PSA has stated that a shareholders agreement will 'ensure the protection of both parties' interests as well as the sustained quality of the logistics news services provided by Gefco to the PSA Group'.
The potential new shareholder of Gefco may face challenges in dealing with any future changes to Gefco's arrangements with PSA and GM. Uncertainty beyond a 3-5 year period may have made private equity investors wary about paying more for Gefco.
Vitaly Belskiy, a consultant at Frost and Sullivan, called the deal a 'win-win' for both RZD and PSA, but noted that the win for RZD would be more long-term than the equity gain for PSA. The provider will remain headquartered in France, and Gefco's management is likely to support the deal with Russian Railways.
Gefco uses Transcontainer to move freight from Asia on the Trans-Siberian railway for Peugeot production in Kaluga. The pricing with a struggling PSA could come under scrutiny under a new shareholder. Plans are being drawn up to sell a minority stake in Russian Railways for 2015 or 2016 in a potential London initial public offer.
This development marks a significant shift in the logistics news industry, with Gefco poised to expand its operations under the new ownership. The exact terms of the deal are yet to be finalised, but it is clear that this move will have far-reaching implications for both Gefco and its stakeholders.
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