TransContainer listing attracts interest
A Russian Railways subsidiary, TransContainer will float 5,002,118 shares, or 36% of the Company’s stock in shares and Global Depositary Receipts (GDR). 4,654,749 of the shares being placed are currently owned by Russian Railways, with a further 347,369 shares currently owned by Moore TransContainer Ltd.At $80 per share, or $8 per GDR the move is expected to raise about $400.2 million, and value TransContainer at $1.32 billion.
Vladimir Yakunin, President at RZD, was positive about the interest of foreign investors.
“The first IPO of a Russian railways subsidiary is positively taken by foreign investors, which particularly shows their support of a structural reform of Russia’s railway industry. Russian Railways welcomes new shareholders of the Company and will support development of TransContainer operations in Russia and abroad. ”
Pyoutr Baskakov, CEO at TransContainer, noted that listing in Moscow and London was an important strategic step for the Company, and the deal would become a “landmark in the continued railway industry reform in Russia.”
The listing price was determined at the bottom of the $79-$99 range, with Dmitry Baranov, from Finam Management, saying it is a good outcome.
“The fact the share price of Transcontainer was determined at the bottom of the range, isn’t at all bad for the Company. It’s obvious that investors showed enough interest in the shares, and this fact alone is good.”
Zerich Capital Management senior analyst, Victor Markov, agrees adding that “TransContainer is quite a successful company that works efficiently, so investor interest is quite high” and agreeing with the company that “this is the beginning of RZD’s reformation.”
Andrey Goltsblat, Managing Partner at Goltsblat BLP, says differences between Russian and international legislation could be an issue which will add to the experience base for Russian state owned companies, and which international investors will need to be aware of.
“Furthermore ‘indemnity’, the means to compensate another party to a contract for any loss that such other party may suffer during the performance of the contract, still needs to be enforced by Russian law. Completion accounts and earn-outs can be dealt with under Russian law, but need to be structured in different ways, via pricing assumptions and price adjustment mechanisms.
Western investors also often prefer to rely on courts outside of Russia for dispute resolution, particularly the London Court of International Arbitration (LCIA). I think that the new influx of investors will improve the management of the state-owned firms, as they bring knowledge, experience and a fresh approach to inject into the companies’ strategy and vision. Russia is a lucrative market with good economic prospects, especially compared to Western European markets, but with these opportunities come risks. The Russian market has a particular regulatory, legal and business landscape for potential bidders to navigate and investors will need to tread carefully.”