RUSSIAN tycoon Sergei Generalov, the controlling shareholder and president of Far Eastern Shipping Company (FESCO), has decided to sell the country's once the country's biggest shipping company after disputes with the Kremlin over his ambitions, reports New York's Business Insider.

The reported sale talks are a signal that Generalov is willing to sell if he is paid enough, reported Russia's often controversial business daily, Kommersant. The reported buyer is Summa Capital. owned by Ziyavudin Magmedov, a rival of Mr Generalov's ports and container activities.

Maritime industry sources said they were not surprised at the planned sale as FESCO is struggling and Mr Generalof's expansion plans into container handling and rail logistics has been thwarted by Russian Railways (RZD) boss Vladimir Yakunin and the Ministry of Transport.

Their opposition has also made the profitability of Mr Generalov's railway operations vulnerable to state competition, said the report.

Mr Generalov wanted to buy control of Transcontainer, the state-owned rail carrier and dominant intermodal players, but was blocked by Mr Yakunin and the Kremlin. FESCO's market value has reportedly collapsed from a peak of US$3.5 billion in 2008 to $700 million and $1 billion since January.

Mr Generalov holds 56 per cent of FESCO through his holding of Industrial Investors. Another 13 per cent is held as treasury stock through an offshore entity called Neteller Holdings. The European Bank for Reconstruction and Development and East Capital holds four per cent and a Swedish investment fund has seven per cent. Public shareholders of Moscow-listed FESCO hold 20 per cent.

FESCO's shipping generates 10 per cent of its operating profit, while its port terminals add another 22 per cent. If Mr Magomedov takes over, and combines it with his quarter-share in the Novorossiysk and Primorsk port companies, he may improve his status as a preferred bidder.

Mr Magomedov may then figure more in the privatisation of other port assets around the country, as well as in the government's privatisation plan for Transcontainer, said the report.

Mr Generalov's exit reportedly reflects the weakening of Russia's container business, and the intensification of competition between Russian box carriers. The slowing of growth of Russia's container volumes, reported as the third quarter gave way to the fourth quarter last year, has now turned into an outright decline in the latest figures released for the first quarter by Transcontainer.

Shipping Gazette - Daily Shipping News