Moscow, Russia- April 30, 2013 - Sistema JSFC (the "Company" or together with its subsidiaries, "the Group") (LSE: SSA), the largest publicly-traded diversified holding company in Russia and the CIS, today announces the completion of another stage in the planned reorganisation and strategic integration of the Group's transportation assets - SG-trans OJSC ("SG-trans") and Financial Alliance LLC ("Financial Alliance"). As a result of the integration, a single unified operator of railroad freight transportation will be created and will operate under the SG-trans brand. The strategic objective of the united operator is to become one of the Top 3 operators in the railway market of the Russian Federation.
Sistema's transportation portfolio currently consists of SG-trans, 100% of which was acquired by Sistema for RUB 22.8 billion during the privatisation auction in November 2012 and Financial Alliance, a 50% stake of which was acquired for RUB 3.41 billion by Sistema from its subsidiary, JSOC Bashneft, in December 2012. Sistema's transportation assets own and operate rolling stock comprising of approximately 30,000 railcars in total.
During the first stage of the restructuring of the rail assets, which was completed in April 2013, SG-trading was separated from SG-trans into a standalone entity, which is 100% owned by Sistema and unites non-core assets relayed to the LPG trading and storage.
At this stage of the reorganisation, which Sistema has completed today, the Company sold 70% of its shares in SG-trans to Financial Alliance for RUB 12.0 billion. The price of the deal is based on the valuation of SG-trans, excluding SG-trading.
In addition, Sistema signed an agreement with Unirail Holdings Limited ("Unirail"), its partners in Financial Alliance, regarding Sistema's sale of its 15% stake in SG-trans for RUB 2.5 billion to Unirail in the second quarter of 2013. In accordance with the agreement, Sistema and Unirail will form the parity structure of ownership and management of railway assets by sharing the risks and the initial investments of Sistema.
Furthermore, the agreement reflects the intention of both parties to sell 100% of SG-trading to a third party by the fourth quarter of 2013 at a fair market price. If the deal is not completed within the stated period, Unirail agrees to buy out up to 50% of SG-trading from Sistema.
According to the agreement, the final stage of the restructuring of Sistema's rail assets stipulates the merger of Financial Alliance with SG-trans under the SG-trans' brand. This will result in an establishment of a new combined entity with each party owning a 50% stake in it. Both parties agreed to the operational and strategic management of the company on a parity basis.
Mikhail Shamolin, President and CEO of Sistema, commented: "Since acquiring SG-trans at the end of 2012, we've made rapid progress in unlocking its hidden value and recapturing our original acquisition costs. We re-signed superior contracts across our customer base, strengthened the company's management team and began a substantive optimization programme. Looking forward, as a result of the further planned integration of our railway assets on the basis and under the brand of SG-trans, we seek to create a larger, unified player with significant prospects for future growth in terms of business scale and shareholder value. In addition, the integration of rail transportation assets will strengthen the financial and operational stability of the combined operator, increase its operating efficiency, and allow it to pursue a common commercial policy in the future."
Further steps in the strategic integration of the Group's transportation assets will be announced in due course. Completing the matters described in the agreement is subject to the signing and execution of all final legally binding documents and receipt of all necessary governmental and corporate approvals.