Russia Railways arm valued at $5 billion pre-IPO

MOSCOW (Reuters) - Russian Railways is preparing to float its freight operator Freight One later this year and has valued the subsidiary at around $5 billion, the head of the division said on Wednesday.

The state-owned rail operator is planning to offload a number of assets to boost its coffers, and is also in the early stages of floating a major stake in cargo unit TransContainer.

Freight One Chief Executive Salman Babayev told journalists a road show for the IPO could take place in September, when the company receives all necessary ratings.

“I think the company can be valued before the IPO at $5 billion ... We are ready, but the question of exactly when should be directed to (Russian Railways),” he said.

Russia’s railways are a vital part of the economy as they transport vital oil & gas and resources from remote regions to Europe and China.

Russia’s weak infrastructure and lack of major highways mean 85 percent of transportation is by rail, compared to just 9 percent by road, according to Russian Railways. This compares to a 53 percent - 33 percent split in India.

Russian Railways Chief Executive Vladimir Yakunin has said around 15 percent of Freight One’s shares could be placed via a private placement, while 35 percent could be floated publicly.

Freight One was established as an independent freight operator in 2007 and owns more than 200,000 units of rolling stock of various types, the company said on its Web site.

Reporting by Gleb Stolyarov; Writing by John Bowker and Lidia Kelly; Editing by David Holmes and Elaine Hardcastle