OREANDA-NEWS. November 10, 2009. The shareholders of Russia's largest rail freight operator on 23 November will consider an increase in share capital by 2 times, the company reported on Friday. Cash received from this deal could go for purchasing railcars or acquiring a smaller rail freight operator in Russia, reported the press-centre of OTKRITIE FC.

View: An additional share issue must be approved at a shareholders’ meeting, with the amount depending on the BoD. At present, the company's share capital is US11.7m, divided up into 116m common shares of US 0.1 each. At the current market price of US 8.9/GDR, Globaltrans could get an additional US 1bn from this share issue.

We doubt that Globaltrans will sell more than 36% of an additional issue, given the share of existing major holders is 70%. Otherwise, they will have to pay US 500m in cash to keep a controlling stake.

In this case, the company may attract about US 350m - US 400m, which corresponds to more than 10,000 railcars (equal to 40% of its current fleet). The funds raised would probably be used for an M&A deal for a company like Balttransservice, a private operator owned by the same holders as Globaltrans. This would be positive for minorities, since the GDR liquidity and the size of the company would substantially increase.

Alternately, the assets of Balttransservice could be used by major shareholders as their investment into the share capital in order to keep the stake, while other shares could be sold on the market. In this scenario, Globaltrans would increase its capital by over 35%.