Russian Railways sells 25% of largest tie producer to Igor Chaika for $26m

Russian Railways sells 25% of largest tie producer to Igor Chaika for $26m
Igor Chaika

Earlier, Prime Minister Dmitry Medvedev approved of the deal, since Russian Railways may only sell their assets with government permission.

Russian Railways’ Board of Directors voted to sell 25% plus one share of its subsidiary Beteltrans. The buyer is T-Industriya owned by Igor Chaika, the son of the Russian Prosecutor General. As reported by Kommersant, the estimated worth of the transaction is 1 billion 512.5 million rubles ($26.3m). This way, Igor Chaika consolidates 75% of Russia’s largest railway tie manufacturer.

We should remind that in October 2016, Prime Minister Dmitry Medvedev signed a government decree to sell the shares. The Economy Ministry got an approval from the Transport Ministry and the Federal Property Management Agency. It should be noted that since 2004, Russian Railways’ package can only be sold with government permission.

The government eventually ordered to sell 942.425 of Beteltrans shares at a price not lower than the market one determined by an independent appraiser, but not lower than the nominal value of the shares.

There are several contracts between Russian Railways and Beteltrans for the purchase of ties with a total worth of 150 billion rubles ($2.6b) effective till 2019.

However, last year the monopoly failed to fulfill its obligations, so it should be subject to fines of up to 1.5 billion rubles. T-Industriya offered to buy the shares if the fine is cancelled promising also some additional investment on its part.

A compulsory consultation with Russian Railways on issues related to transactions between Russian Railways and Beteltrans associated with a possible change in the supply volume of reinforced concrete ties under long-term contracts is among the transaction terms. Russian Railways has the last word in case T-Industriya and Russian Railways differ in their opinions. Also, T-Industriya is obliged to buy the remaining 25% of Russian Railways plus one share of Beteltrans at the market price, but not lower than 1604.9 rubles per share within one year from the day of contract termination.

The largest business Igor Chaika has today is contract work, for Russian Railways among others.

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