Months of speculation over the sale of PSA Peugeot Citroen’s logistics subsidiary Gefco was brought to an end last week when it was announced that Russian Railways (RZD) had emerged as the winning bidder for a 75% stake in the company worth €800m ($1.04 billion). RZD 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.
The agreement will be subject to antitrust authorities, while Gefco will enter into a consultation with its works council to discuss the offer. It follows PSA’s decision earlier in the year to sell a stake in Gefco, which had record profits in 2011, in an effort to raise cash for its struggling automotive unit.
The payment will made after Gefco pays PSA Peugeot Citroën a special dividend of €100m, though what this involves exactly and how it affects the overall price RZD will pay to PSA has not been made clear. What is clear for the moment is that PSA will retain the remaining 25% stake and the existing management team is to remain in place, with Luc Nadal continuing to serve as president and the head office remaining in France.
The move is expected to further Gefco’s expansion strategy in China, India and Latin America, and accelerate its growth in Eastern and Central Europe, particularly in Russia. It will also allow Gefco to diversify its business base.
According to Vitaly Belskiy, transport analyst at Frost & Sullivan, it is a win-win deal for both PSA and RZD, though he said that it will be a longer term win for the buyer.
“Acquiring Gefco, one of the leaders of the automotive logistics market, a company with a solid operating margin of 5.9% (as of 2011) could be a one-time opportunity for the Russian company,” he said.
Noting the crisis in the European vehicle market Belskiy highlighted that PSA is among the first of the vehicle manufacturers to look for drastic measures to restructure its business regain financial health. However, he also noted that Russian Railways was keen on diversifying its business model and is therefore pursuing a strategy of geographic expansion.
Belskiy said that such a strategy should secure the company’s long-term position in the logistics market, not least because it has set itself a strong target of increasing cargo turnover by around 28% on both Russian and foreign markets by 2015 (compared to 2009).
RZD runs passenger and freight rail in Russia and has controlling stakes in Transcontainer for moving containers by rail and with RailTransAuto for finished vehicles. Gefco also uses Transcontainer to move freight from Asia by rail on the Trans-Siberian railway for Peugeot production in Kaluga.
RZD said the majority stake in Gefco will help it promote transit cargo flows along the Europe-Asia transcontinental route. Russian Railways has been investing in making the route a competitive alternative to ocean routes and said the next logical step would be the development of the sales network for transcontinental transport services via an international logistics company.
Belskiy said the Russian Railways could use the deal with PSA to achieve a number of goals. One of these would be using Gefco’s strong experience in multimodal logistics solutions to develop combined sea, rail and road services for Russia as it does in Europe, in line with RZD’s ‘less rail, more road’ corporate strategy.
“Another viable option, which has always been Russian Railways’ dream, would be to link Asia and Europe using Trans-Siberian Railway in Russia together with road or combined logistics in Europe, and therefore become a single logistics service provider from Asia to Europe reducing delivery time compared to sea shipments,” said Belskiy.
Read a more indepth view of the latest developments in the next edition of Automotive Logistics magazine which will be published at the beginning of October.
