Blackstone Ltd., a privately based equity firm in Mumbai with its parent company Blackstone LP based in New York is set to increase its shareholding in Gateway Rail freight Ltd., by way of converting its entire preference share holding in the company into equity shares, thereby increasing their overall holding in the freight services company which could then take up the overall holding of Blackstone to 47% in the company thereby giving them a powerful seat among the board of directors.
The parent company Gateway Distriparks will continue to hold the majority 51% stake in Gateway Rail Freight with the terms and conditions of the deal yet to be finalized, it is understood that the equity firm came to this decision after the cargo transportation company had offered to buy back Blackstone’s portion which consisted of Equity securities which at that time were held by Blackstone GPV Capital Partners (Mauritius) VH Limited. Gateway Distriparks had offered to buy back the portion from Blackstone at a staggering 600 crores deal which was double the value of Blackstone’s holding in the company.
The investment made by Blackstone in August 2010 mainly consisted of Compulsorily Convertible Preference Shares which by law are to be converted on the date mentioned in the instrument. GFRL had made previous attempts to buy back the shares from the firm with no success. The investment value in the shares was understood to be at 300 crores and experts see the decision by Blackstone to retain the shares as a sign of confidence in the cargo service provider.
It’s also been noted that Gateway Distriparks is set to sell the aforementioned shares to its subsidiary Gateway Rail freight by the way of an Initial Public Offering (IPO), However the refusal of Blackstone to agree to the buyback lead to the plan being scrapped. This information came to light after Gateway Distriparks was in negotiations with Blackstone GPV capital partners who were to facilitate the IPO, however, after refusal from Blackstone LP to agree to the terms of buy back, the negotiations were dropped.
Gateway Rail freight services is a freight service operator that handles the operations of its parent company Gateway Distriparks in operating the inter-modal based logistics system. It even has a fully operational Rail Linked Inland Container depot. They are based in Garhi-Harsaru in Haryana, Ludhiana in Punjab and in Kalamboli in Navi Mumbai. The company also operates a fleet of 21 trains and more than 230 road trailers from its Inland container depots.
The terms of the deal are set to be finalized soon with Blackstone gaining 47% holding in the company, although little under the 51% held by the parent company, it will offer substantial decision making powers to Blackstone in Board meetings as well as the authority to vote on decisions and appointments.