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MÁV Cargo for sale

Hungary's state-run railway company MÁV has on Tuesday invited a bid for 100% of its cargo unit MÁV Cargo Zrt, the total nominal value of which is nearly Ft 30 billion. Indicative bids are to be submitted by 23 July.

Hungarian press has published communication that privatization process of MÁV Cargo Zrt has been started. The deadline for binding bids was set to 19 October 2007.05.29. The goal of the tender is to „maximize the sales price" and to sell MÁV Cargo to a company, which will further improve its efficiency, competitiveness and will also develop the local freight business.

Entry into the first round is open to anyone who signs the non-disclosure agreement and buys the tender documentation for Ft 5 million. As the tender announcement says the share capital of Magyar Államvasutak — MÁV Cargo is Ft 29.533,146 million (about €120 million).

Hungarian authorities want to sell:
- 9 MÁV Cargo shares, now owned by MÁV (Ft 29.513.046, €120.000 each)
- 100 MÁV Cargo shares (nominal value Ft 1000, €10 each)
- 29.513.046 MÁV Cargo shares (de facto united into one share worth Ft 29,513 billion, €118 million).

Unofficial information say that Polish private railway undertaking CTL Logistics is interested in buying Hungarian carrier. Another known probable bidders are Österreichische Bundesbahnen (ÖBB) and Deutsche Bahn (DB).

Will €300 million be enough?
Companies from Austria, France, Germany, the Netherlands, Russia and USA are showing interest for a 100% stake in Hungary's MÁV Cargo. Experts believe the Ft 30 billion package could fetch Ft 70-80 billion (€280-320 million) mainly because it is not just the assets of MÁV Cargo but also its highly valuable business relations on the table. Moreover, the company has further value in its accumulated expertise, its geographical position and the three pan-European railway lines crossing Hungary.

The package with a face value of Ft 29.5 billion will be sold to the highest bidder that also vows to pay the purchase price within 15 days after the announcement of the winner. While strategic investors are most likely to queue up for MÁV Cargo, financial investors may also appear among bidders. Railway circles believe the most potent bidder would be Germany's DB, but good chances of winning are given to Rail Cargo, the freight transport unit of ÖBB.

Rail Cargo Austria boasts a 30% market share in Europe. Companies from France, the United States and the Netherlands are also said to be interested and Russian and Ukraine railway firms are also seen eyeing MÁV Cargo. There are views, however, that the sales prices will be smaller than the aforementioned sum for MÁV Cargo lacks an engine fleet, though it has a 13,000-strong carriage fleet. Hungary's budget will not pocket a dime from the sales price, since the entire sum will go for the straightening up of MÁV's capital position.

MÁV Cargo had a share of nearly 20% on the Hungarian freight transport market and a 82-83% share on the rail cargo market in 2006. The company shipped some 47 million tons of goods last year, 6% more than in 2005. MÁV Cargo's revenues rose 7.7% year on year to Ft 93 billion in 2006 and the share of international transports reached 75%, which the company intends to increase further. MÁV Cargo posted Ft 2.8 billion pre-tax profit last year, making this unit the only segment of MÁV that is not deeply in the red. (railway-market.)