Sistema offering 10-20% more for Freight One stake than UCL, RZD declines - paper
MOSCOW. Nov 7 (Interfax) - Sistema JSFC is offering to pay 10-20% more for a blocking stake in Freight One than the railroad operator's majority shareholder, Vladimir Lisin's UCL group, which Russian Railways (RZD) has selected as the buyer of the shares.
"Sistema has not given up its attempts to acquire the blocking stake in Freight One. Sistema president Mikhail Shamolin at the end of October sent RZD an offer to buy 25% plus one share of Freight One. Sistema can pay more for the asset than the winner of the tender, LLC Independent Transport Company (NTK). NTK, in the tender to which Sistema was not admitted, promised to pay 50 billion rubles for the blocking stake in Freight One. Now Sistema is promising to pay 55 billion-60 billion rubles for it, but RZD did not accept the offer," business daily Vedomosti reported on Wednesday, citing sources close to RZD and Sistema.
A spokesman for Sistema declined to comment.
Competitive negotiations with potential buyers of the Freight One stake have been concluded. The best binding offer has been received from the UCL group's NTK, Vedomosti reported an RZD representative as saying. The company is now preparing recommendations for the board of directors and the government to make a deal with NTK on the terms it proposed. Representatives of the Federal Property Agency, Economic Development Ministry and Transport Ministry did not comment.
The results of the competitive negotiations were announced on October 16. NTK and Sistema were vying for the blocking stake. The tender consisted of three stages, the paper reported a Sistema executive as saying. Binding offers were submitted in the first round, and sealed bids were made in the second round. If the prices offered differed by less than 200 million rubles, a third round would have been held in the form of an open auction.
But RZD disqualified Sistema from the second round of the sale due to losses reported in the company's financial statement to Russian Accounting Standards, Shamolin said earlier. He said that the tender was open to companies that had not posted losses for 2011, but the type of financial statement was not stipulated in the documentation. Sistema did post an RAS loss of 13.6 billion rubles for 2011, but it had a net profit of $218 million to US GAAP. Therefore, he said the company might challenge the results of the tender in court.
RZD's refusal to accept Sistema's bid appears strange given the statements by the railroad monopoly's management about the deficit in the company's investment program, IFC Metropol analyst Andrei Rozhkov said. The capex deficit amounts to 1.9 trillion rubles in the period to 2020, of which RZD plans to borrow only 400 billion rubles and the remainder it hopes to get from the government.
There is nothing standing in the way of RZD making a deal with Sistema, Vedomosti reported the head of the corporate practice group at Goltsblat BLP, Anton Panchenkov as saying. Until a contract is signed with NTK, RZD is free to consider other offers, he said. "Competitive negotiations" are not a tender, otherwise RZD would have been obligated to sign a contract with NTK, he said.
Panchenkov said Sistema's only chance of disputing the deal is to file a lawsuit. Perhaps the offer Sistema submitted to RZD will then be cited as evidence that RZD intended to sell the Freight One stake to NTK in particular, he said.
Freight One is the largest railway operator in Russia, with over 190,000 railcars of various types. RZD owned all of the company's stock until the end of last year. Now Freight One is part of UCL Group's railway holding UCL Rail, which manages railway operators, stevedoring companies in the north-west and south of Russia, the North-West and West shipping companies and several other shipping assets.