Russia’s FESCO sells NCC; where to now?
27.07.2010 (12:56) | Financial Times
FESCO’s explicit rationale, as offered by its spokesperson, is that the deal will provide capital for delayed expansion projects.- - - - - - - - - - - - - - - - - - - -
A 240 per cent return is not easily scorned - especially when it also ends a fractious relationship. Nonetheless, Russian port group FESCO’s sale of its stake in National Container Company (NCC) raises questions about where its transport business might look now.
FESCO paid $375m for half of NCC, Russia’s largest container-terminal operator, in 2007, and has now received $900m for that share. The buyer is unconfirmed, yet appears to be linked to First Quantum, a Russian oil trader which owns the other half of NCC and which had struggled to get FESCO’s backing for key projects.
The $900m price is the big plus for FESCO. Six months ago, First Quantum was reported to have offered less than half that figure. The agreed fee reflects the improving economic climate, and is described as “attractive”, by Rye, Man & Gor Securities analyst Ekaterina Andreyanova. FESCO’s spokesperson points out that it’s 15 times NCC’s earnings before interest, tax, depreciation and amortisation.
But a question mark hangs over the strategic implications for FESCO. “This is a large deal which more than covers FESCO’s financial debt, but what is perhaps not as clear is why FESCO is apparently disposing of all its ports in the European part of Russia,” Andreyanova says. NCC part-owns ports in the Gulf of Finland and the Black Sea.
“A key part of [FESCO's] strategy is the link-up between the far east and the European parts of Russia. It may be that FESCO is hoping to secure contracts with other European ports to cover this in the future.” However, Andreyanova argues it’s unlikely that the container shipping market has changed enough for the deal to indicate a shift eastwards.
FESCO’s explicit rationale, as offered by its spokesperson, is that the deal will provide capital for delayed expansion projects. The 2009 recession in the container-shipping market forced FESCO to hold off investment in Pacific and inland port projects. Now FESCO can revisit them, and consider other proposals such as the acquisition of new rail cars and existing businesses in rail transport.
Whether those projects materialise or not, the stake FESCO sold may change hands again in the near future, as First Quantum looks to take forward its own port-building plans.
By Thomas Williams
www.blogs.ft.com
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