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Russian rail freight company buys Metalloinvest unit

by Jonathan Braude  |  Published April 27, 2012 at 9:30 AM
Globestran_227x128.jpgRussian rail freight operator Globaltrans Investment plc Friday, April 27, said it would acquire the rail transport arm of Moscow-headquartered iron ore giant Metalloinvest Management Company LLC, bolstering its position in the country's increasingly privatized rail cargo sector.

The agreed $540 million acquisition of LLC Metalloinvesttrans, or MIT, will boost Globaltrans' 2011 transportation volume by 24% to 86.4 million metric tons and its operating profit by 28% to $554 million on a pro forma basis. It will also increase the company's net debt by 225% to $840 million, the buyer said.

"The transaction brings Globaltrans' market share in metallurgical cargoes, on a pro forma basis for 2011, to an estimated 15%," said Globaltrans CEO Sergey Maltsev in a statement.

He added that the acquisition and the three-year service contract the company signed with the seller provided "a low risk path to grow our business and consolidate our position in the market."

London-listed Globaltrans said it had contracted to handle all the seller's cargo volumes in the first year and then 60% of the volumes in the second and third years.

The deal will also enable Globaltrans to increase its total fleet of rail cars to about 60,000.

Metalloinvest, which is Russia's largest producer of iron ore, and the global No. 5, produced over 40 million metric tons of ore in 2011 and has iron ore reserves of an estimated 15 billion tons. It also produced about 5.8 million tons of steel.

MIT, which handled all its parent's transport, including through leased capacity from third-party carriers, made an operating profit in 2011 of $122.3 million, up from $106.5 million the previous year. However, it made a pretax loss of $80.9 million, compared with an $86 million profit the previous year, largely due to the cost of finance.

Metalloinvest said the sale of the transport unit would enable the company to free up capital. Jonathan Braude 
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Tags: Globaltrans Investment plc | M&A | Metalloinvest Management Company LLC

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