OREANDA-NEWS. September 24, 2012. At a meeting of the board of directors PSA Peugeot – Citroen agreed to enter into exclusive negotiations with Russian Railways following a binding offer to acquire 75% of the shares of GEFCO, a PSA Peugeot – Citroen subsidiary which is one of Europe’s top ten major logistics operators and a major provider of integrated 4PL/3PL logistics services, reported the press-centre of RZD.

The PSA Peugeot – Citroen board recognized the bid from Russian Railways as the most attractive. The collaboration with Russian Railways would provide a stable environment for the operation and development of GEFCO with a minimal level of corporate risks and ensure maximisation of the company’s value. Russian Railways intends to retain the management of GEFCO and all its existing business units, including those which provide services to PSA Peugeot – Citroen.

The acquisition of GEFCO would enable Russian Railways to increase the attractiveness of transit cargo flows along the Europe – Asia transcontinental route. Russian Railways can offer competitive transportation services along this route after undertaking a significant amount of work recently. The next logical step is to develop a sales network for transit transcontinental transportation services via an international logistics company.

The transaction would have a positive effect on the Russian Railways’ business and ultimately on the global competitiveness of the Russian economy by cutting production costs by using world-class state-of-the-art logistic technologies and increasing the efficiency of existing infrastructure by optimizing transportation. It would also improve conditions for the development of high-technology industries for which effective transport and logistics infrastructure are essential.

During the course of the exclusive negotiations, mandatory consultations will be held in the near future with the relevant works councils and the transaction documentation, including a shareholders agreement between Russian Railways and PSA Peugeot – Citroen, will be discussed. The envisaged transaction would be subject to approval by the anti-trust authorities in the relevant countries.

JP Morgan and VTB Capital are serving as Russian Railways’ joint financial advisors on the transaction.

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Open Joint Stock Company Russian Railways is the sole owner of the rail track and key rail infrastructure in Russia and one of the three largest transport groups in the world with freight turnover of almost 2.7 billion ton-kilometres in 2011 and passenger turnover of about 130 billion passenger-kilometres. Consolidated revenue in accordance with IFRS totalled RUB 1,481bn (EUR 36.1bn) in 2011, while EBITDA amounted to RUB 356bn (EUR 8.7bn) and net income to RUB 183bn (EUR 4,5bn).

Russian Railways enjoys a credit rating equal to that of the Russian Federation (Baa1/BBB/BBB) assigned by international rating agencies Moody’s, Fitch and Standard and Poor’s.

GEFCO, an international logistics operator, manages over 300 offices in 32 countries worldwide. Key GEFCO customers are major automotive and industrial enterprises, such as Peugeot Citroen, General Motors, L’Oreal, Siemens, Bosch, IKEA, Henkel, and Procter & Gamble. GEFCO’s major shareholder is the automotive concern PSA Peugeot – Citroen (France). PSA is also GEFCO’s key customer, accounting for 62% of its revenue. In 2011, the company’s revenue increased by 10% to EUR 3.7 billion, with operating profit amounting to EUR 220 million.