May 18, 2012 / 7:12 AM / 8 years ago

Russia's Summa to buy FESCO for $1 billion: source

MOSCOW (Reuters) - Russian investment and trading group Summa has agreed with businessman Sergei Generalov to buy control of transport group FESCO (FESH.MM) for around $1 billion, an industry source familiar with the deal said on Friday.

Summa, involved in renovating the Bolshoi Theatre, building an oil terminal in Rotterdam and exporting Russian grain, is in negotiations to buy Generalov’s 56 percent stake in FESCO.

“The deal is almost done, it’s in the final stage,” the source said, adding it may be closed in June.

FESCO shares rallied 23 percent before easing to trade 11 percent higher as analysts ran the numbers on the deal, which values the company at more than twice Thursday’s market closing price.

“We think that the stock could soar, as minority shareholders might be able to play on the high valuation due to the potential sale triggering a mandatory offer,” VTB analyst Elena Sakhnova said in a note.


The deal, if consummated, would extend the logistical reach of Summa, an acquisitive group owned by Ziyavudin Magomedov that actively trades oil - Russia’s main export - and is looking to branch into agricultural commodities.

FESCO’s asset portfolio includes a sea port in Vladivostok and shipping fleet, railway company Russian Troika, and 21 percent of state-controlled rail group Transcontainer (TRCN.MM) (TRCNq.L).

The deal follows a slump in FESCO’s earnings last year to $19 million despite 29 percent growth in revenues to $1.03 billion.

Generalov became a seller after failing to secure control over Transcontainer, whose majority owner, state Russian Railways, asked the government last year to delay the sale of its stake due to poor market conditions.

FESCO had announced last week that it had agreed to sell rail operator Transgarant to privately-held Neftetransservis for a total consideration of $650 million.

The source said, however, that Summa would buy Transgarant as part of the deal and Neftetransservis would only be able to buy the asset if the Summa deal fails to close.

According to the Kommersant daily, the break fee on the Neftetransservis deal is $25 million.

Summa does not disclose detailed financial results, but has said that its annual revenues are around $10 billion.

Its main transportation asset is Novorossiisk Commercial Sea Port (NMTP.MM), which it controls together with state pipeline monopoly Transneft (TRNF_p.MM).

Summa is viewed in the industry has having close ties to Dmitry Medvedev, who was appointed as prime minister by recently-elected President Vladimir Putin, and is due to form a government next week.

“Summa might have a stronger lobby and we do not rule out (it) could bring about progress in the Transcontainer privatization,” commented VTB’s Sakhnova.

Representatives of FESCO and Summa declined to comment.

Reporting by Gleb Stolyarov; Writing by Douglas Busvine; Editing by Mark Potter and Jon Loades-Carter

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