Privatization re-started: Romania to sell control package in freight company CFR Marfa by May 2013

The Romanian state plans to sell the controlling stake in freight railway operator CFR Marfa in a privatization process that will include negotiation based on preliminary offers and a closed bid. The bidders will have to submit a guarantee of EUR 10 million – equivalent in RON, which is 17 percent of the nominal value of the CFR Marfa stake owned by the state.

To pre-qualify for the bid, companies must have relevant experience in freight transport and operational and financial means to take over and develop the business, shows a recent Government decision which approved the privatization strategy. However, the only criteria for winning the bid will be the price.

The strategy has moved away from the sale of the full package owned by the state via an open outcry auction.

If the Transport Ministry does not sign a privatization contract, the process will be re-started and the Ministry can decide to apply any privatization method, including direct negotiation with the other bidders in the auction.

The Government pledged to sell the majority in CFR Marfa in the final rounds of talks with the International Monetary Fund (IMF), with the privatization announcement to be placed in March this year, and the sale to be completed by May. The deal however could continue into June, as Transport Minister Relu Fenechiu recently said.

CFR Marfa was initially supposed to be privatized last year, but the privatization strategy had not received the green light from the country’s Supreme Defense Council (CSAT). In fall last year, came the fourth privatization attempt for CFR Marfa. Back then the Romanian Government tried to sell via outcry bid the full share package, as well as the package owned by the state after the conversion of the company’s debt into shares.

In September 2012, the country’s Government said it was in concrete and advanced talks over the CFR Marfa privatization, which was one of the priorities for 2012. Romania initially wanted to sell 20 percent of CFR Marfa, either through an Initial Public Offering, or with a strategic investor, by October 2012.

The company posted losses of EUR 31.3 million in 2011, 68 percent higher than the level approved by the Government. CFR Marfa’s last profitable year was 2007.

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