First Aggregates Company (FAC), Russia’s largest producer of crushed stone and one of the country’s largest aggregates producer, may be sold to one of its local competitors.
The amount of the deal is estimated at 4.8 billion rubles (US$130 million). Among the main bidders for the company, owned by the national railway monopoly RZD, are rumoured to be several large Russian aggregates producers, including Berdyaush, JSC Yuzhuralavtoban from Magnitogorsk and the National Aggregates Company, owned by Russian businessman Yuri Zhukov.
According to some sources close to FAC, the deal may be also of interest to foreign investors, although the Russian government is unlikely to sell the country’s flagship aggegates producer to foreigners. According to a recent decision of RZD, FAC should be sold as part of the company’s plans for the sale of non-core assets. A deal may be closed soon.
Representatives of the Russian Federal Anti-Monopoly Service said that the deal, regardless of its outcome, will not pose a threat to competition in the domestic aggregates market.
RZD is the largest consumer of crushed stone in Russia using up to 40 million tonnes/year, and it is understood it would continue purchases of crushed stone from FAC after its sale.
Analysts of the Russian Ministry of Industry and Trade feel the acquisition of FAC will be beneficial to its future owner because of the long-term contract to supply crushed stone to RZD. Future contracts are expected to be large, despite recent statements from RZD that this year’s volume of purchases of crushed stone will decline by 25% due to a reduction in the company’s investment programme caused by a freeze on railway tariffs.
The analysts say National Aggregates Company can be considered as a main bidder for the asset, although according to some sources close to RZD, it will consider each bidder for the asset. At present FAC comprises 18 gravel plants throughout Russia and specialises in the production and processing of aggregates. In 2012 the company produced 13.5 million tonnes of crushed stone. It also operates 13 quarries and has several plants in Russia.
