12/31/2014 12:00:00 AM

PKP CARGO buys AWT, one of the biggest private rail freight operators in Europe, for over PLN 445m

On December 30th, PKP CARGO signed an agreement to buy an 80% stake in Advanced World Transport, the second largest rail freight operator in the Czech Republic active in Central and Southern Europe. The transaction is worth EUR 103.2m (PLN 445m). The acquisition will be finalised after authorisations are obtained from Polish, Czech, German and Slovak antitrust authorities. The purchase of AWT is the first ever foreign acquisition of this type made by a PKP Group company. The acquisition of one of the biggest private rail operators in Europe will strengthen PKP CARGO’s position in Central and Southern Europe, in particular boosting its capacity to service the north-south transportation corridor.

The sellers of the 80% interest in AWT are Mr Zdenek Bakala and his The Bakala Trust. The remaining 20% will still be held by a Czech company Minezit SE, with which PKP CARGO has signed a shareholders agreement that regulates in detail mutual relations between the shareholders as well as how and when PKP CARGO is to potentially purchase the remaining shares in AWT.

“This is a historic moment for PKP CARGO and the entire PKP Group, and at the same time one of the largest transactions involving the purchase of a foreign business by a Polish company in recent years. The acquisition of AWT will cause our share in the Czech market to grow by leaps and bounds and will significantly strengthen the strategic position of PKP CARGO in Central Europe. The Czech market is of key importance for us, because of the numerous links with the Silesian region. The Czech Republic is also the gate to Southern Europe, towards the Adriatic Sea. Our presence in this country is a perfect opportunity to extend our train routes. Considering AWT’s growth prospects in the near future, the participation of a Czech partner as AWT’s shareholder is also important for us,” says Adam Purwin, President of PKP CARGO’s Management Board.

The agreement, which was signed on Tuesday, December 30th, contains conditions precedent whereby its execution is suspended until authorisation of the change of control is obtained from financial institutions providing funding to AWT, from antitrust authorities in Poland, the Czech Republic, Germany and Slovakia as well as until the transfer of one share certificate issued by Advanced World Transport a.s. is remedied. The agreement may be terminated if all the conditions precedent are not satisfied (or waived) before a long stop date set out in the agreement.

“The PKP CARGO group is one of the biggest players on the European rail freight transport market. AWT will gain a strong strategic partner with both firms sharing not only linked rail networks but also shipping terminals that are advantageously positioned on continental transport routes. PKP CARGO is the company that will enable AWT to not only enjoy significant trade synergies but also to progress towards further development in the Central and Eastern Europe region,” says Kamil Čermák, Chair of the AWT Board and BMM Managing Partner, while appraising the transaction.

Czech Republic – the gate to the south of Europe

The Czech Republic is the ninth biggest rail freight market in Europe. It is there that major European transportation routes intersect. PKP CARGO’s strong presence on this market will provide an opportunity to attract new customers and ensure better handling of freight operations into the Czech Republic and beyond, to the south of Europe.

“We are convinced that there is a possibility to further increase our share in the Czech market and we recognise the enormous potential of the Ostrava-Paskov terminal, whose strategic location makes it highly suitable to serve as a hub for ports in Hamburg and Gdańsk,” says Jacek Neska, Member of PKP CARGO’s Management Board responsible for commercial affairs.

The terminal in Paskov, which is situated only 25 km away from the Polish border and 60 km away from the Slovak border, fits in perfectly within the network of strategically located handling sites of PKP CARGO in Poland.

Rolling stock synergies

The acquisition of AWT generates numerous synergies with regard to the operation of rolling stock. AWT has approximately 160 locomotives, including 10 multi-system engines, and five thousand freight wagons. AWT leases a third of the wagons it uses. PKP CARGO’s sizeable pool of rolling stock and technical will make it possible to considerably reduce the costs incurred by AWT to lease and service its rolling stock, by using the technical facilities of the Polish operator. For PKP CARGO this means an even better utilisation of its rolling stock and its service workshops.

“PKP CARGO will be able to replace AWT’s rolling stock with its own wagons. We will also be able to use multi-system locomotives. What is also very important is that our technical facilities will be more effectively used. Operationally, we are fully ready to handle increased traffic generated due to the acquisition of a nearly 10% share in the Czech market,” says Wojciech Derda, Member of PKP CARGO’s Management Board responsible for operations.

Attractive price

PKP CARGO will finance the transaction, which is worth EUR 103.2m, with its own funds.

“Looking at the parameters of this transaction, EBITDA and the book value, we have secured a very attractive price, commensurate with the current value of the company and its potential. At the same time, PKP CARGO’s financial situation allows us to easily service the transaction and does not restrict our development plans for next years in any way,” says Łukasz Hadyś, Member of PKP CARGO’s Management Board responsible for financial affairs.

About AWT

AWT Group is one of the biggest private rail freight operators in Europe and the second biggest rail operator in the Czech Republic, with a nearly 10% market share in 2013 as measured by transport performance. In 2013, AWT Group transported 12 million tonnes of goods, delivered 1.54m tkm and generated revenues amounting to EUR 282m. For five years, the company has consistently been reporting a growth in EBITDA margin profitability.

AWT Group provides services in the Czech Republic, Slovakia, Slovenia, Hungary, Germany, Romania, Bulgaria, Poland and Croatia. With a workforce of over two thousand employees, AWT Group services comprehensively large industrial plants in Central and Eastern Europe. The Group specialises in the transportation of heavy and bulk goods, including coal, steel and auto parts.

AWT Group manages an extensive pool of rolling stock consisting of approximately 160 locomotives and over five thousand wagons (of which 65% are owned by the company).

AWT also operates 60 railway sidings in the Czech Republic, has a company providing rolling stock services (maintenance and lease of wagons), as well as a company specialising in construction works, land reclamation and waste management services.


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