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By John Helmer, Moscow

Sergei Generalov has once again proved to be the federal Transport Ministry’s Ninja, leaping out of his staid business-suit and spectacle disguise to toss his grappling-hook, and rescue the privatization of state-owned rail transport company, Transcontainer.

The traditional ninja was retained and paid by his daimyo or shogun: who is giving Generalov his running-orders isn’t so clear, nor the purpose. International shareholders of Fesco are wondering where their company’s money is going.

Far Eastern Shipping Company (Fesco), owned by Generalov, announced yesterday that it is the anchor purchaser of shares of the Russian Railways subsidiary Transcontainer, which placed 35% of its shares in an initial public offering (IPO).

Fesco’s announcement says it bought 12.5% of the shares on offer for US$138.9 million. JP Morgan, Morgan Stanley, and Troika Dialog were the arrangers; TKB Capital was the underwriter. TKB, which stands for TransCreditBank, is a pocket institution of the Russian Railways group. State-owned Russian Railways remains in operational and shareholding control of Transcontainer, as the only two identifiable foreign stakeholders, Moore TransContainer and the London-based GLG Emerging Markets special situations fund , appear to have sold out. If the shares reserved for a management options scheme are taken out of the count, the Fesco purchase amounted to almost 40% of the IPO.

The price at which Transcontainer sold its shares to Fesco was 10% below the announced IPO target — another sign that real market demand for the state company was poor, and required a discount of at least 20% to comparable rail companies in other emerging markets.

With 46 rail siding terminals and 25,500 flatcars, Transcontainer moves roughly half of all the container volumes (measured as twenty-foot equivalent units, Teu) carried by rail in Russia; in the first half of the year, its throughput was 700,000 Teu. Industry sources say that without Fesco, the sale by the state rail management would have failed.

Alfa Bank reported today that Generalov may be acting at the government’s direction, and “may have an agreement with the government/Russian Railways to increase its stake in the company to a controlling one.” Alexei Bezborodov, a Moscow maritime analyst, commented: “There’s nothing to analyze. But we have questions. And we are looking for answers.”

Generalov started making his fortune as a protégé of Mikhail Khodorokovsky’s businesses. But he has survived the conviction and imprisonment of his patron; business competition with Mikhail Fridman’s Alfa group; and also the war between Russia and Georgia, where Generalov has pursued several lines of business, including gold and copper mining and vodka production. Handling the Generalov group’s Russian and Georgian dealings, according to the group’s website, is an American citizen and US lawyer, Joel McDonald. He claims to have been “the chief foreign advisor to the Russian Government on tax reform between 1994 and 1997”. McDonald is also a director of a London unit of Generalov’s holding, Industrial Investors Capital Management Limited, which has filed in the UK High Court to establish the group’s reputation. A statement, read out in the High Court on July 9, 2008, acknowledged Generalov’s business links with Khodorkovsky’s Yukos oil company and Menatep bank, adding that Generalov “was never associated with corrupt activity during his time at those two companies.”

Russian maritime sources claim that Generalov’s entrée into the shipping business was arranged by the Transport Ministry in Moscow an effort to put an end to shareholder fights, involving a foreign stakeholder of Fesco, Andrew Fox and Tiger Securities, and the interests of a regional boss, Primorsky Krai governor, Yevgeny Nazdratenko. Read all about that here and here.

At present, Generalov’s holding owns 54% of Fesco. The Swedish fund East Capital Russia and the European Bank for Reconstruction and Development own minority blocs of shares.

The Moscow brokerage Finam which actively encourages trade in Fesco shares reports today: “We regard the acquisition of the stake as a neutral factor for FESCO. We estimate the shares acquired as a financial investment, not permitting FESCO to participate in the day-to-day management of the company and only allowing it to place one representative on the Transcontainer BoD. As to closer ties in operating activities, the goal could be achieved without buying the shares, in our view. We do not exclude, however, that FESCO could raise its holding to a blocking interest in the future, thereby gaining the right to take part in the day-to-day management of Transcontainer and producing a synergy effect. In our view, the purchase of the shares was triggered by the spare cash FESCO has at its disposal after the sale of a stake in the National Container Company for USD 900 mn.”

Renaissance Capital maritine analyst Alexander Kazbegi told his clients: “We believe that this is not the best use of cash by FESCO.”

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