Global Trans to Acquire Metalloinvesttrans For $540 Million

Posted: 27th April 2012 09:54

First large scale M&A transaction between an independent private freight rail group and a large natural resources company in Russia

Globaltrans Investment PLC ("Globaltrans" or the "Company", and together with its consolidated subsidiaries, the "Group"; LSE ticker: GLTR) today announces that it has agreed to acquire 100% of LLC Metalloinvesttrans ("MIT"), the captive freight rail transportation operator of Metalloinvest, a leading global iron ore and HBI producer based in Russia, for USD 540 million on a cash and debt free basis.

MIT is a captive freight rail operator of Metalloinvest which as at 31 December 2011 operated 9,202 railcars of which 8,256 were owned and had an average age of approximately 8.7 years. MIT manages rail logistics of Metalloinvest cargo volumes, having handled 44.2 million tonnes in 2011, primarily of metallurgical cargoes, using its owned and leased-inrailcar fleet as well as engaged fleet from third-party operators.

As a part of the transaction Globaltrans and Metalloinvest have agreed a three-year service contract. In accordance with this contract, Globaltrans will provide rail freight transportation and logistics services to Metalloinvest, handling 100% of all its rail transportation cargo volumes in year one based on agreed pricing terms and 60% in the following two years based on a "right of first refusal" principle.

MIT will be acquired through OJSC New Forwarding Company, a 100% subsidiary of Globaltrans. The transaction will be financed through the use of the Group's own funds and from secured credit facilities. The transaction is expected to be closed at the end of May 2012, subject to regulatory approvals.

This transaction will enable Globaltrans to increase its total fleet to about 60 thousand units by mid-2012, thus further enhancing its position as a leading independent private freight rail group in Russia.

Sergey Maltsev, Chief Executive Officer of Globaltrans, commented: "The freight rail industry has undergone significant changes in the past few years and this acquisition marks a further step-change for the sector. It is increasingly important to have the scale and resources to maximize efficiency and profitability, and be able to meet the needs of large cargo owners.

We have made it clear that we are looking to capitalize on market opportunities such as MIT which is a high-quality business that, combined with the service contract with Metalloinvest, provides a lowrisk path to grow our business and consolidate our position in the market.

Our extensive expertise in the operation of railcars and detailed understanding of transportation requirements of metals and mining companies is expected to enable operational efficiencies benefitting both Globaltrans and Metalloinvest. The transaction brings Globaltrans' market share in metallurgical cargoes [1], on a pro-forma basis for 2011, to an estimated 15%."

Eduard Potapov, Chief Executive Officer of Metalloinvest, said: "The sale of MIT will enable Metalloinvest to free up capital. As a result of the deal, Metalloinvest's subsidiaries will be provided with the integrated solution allowing them to use the railcar fleet of one of Russia's largest and most efficient railway operators."

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