31.10.2012

Ramirent and Cramo to merge in Russia

Ramirent and Cramo have agreed the formation of a joint venture combining Ramirent’s businesses in Russia and Ukraine with Cramo’s operations in Russia, excluding the Kaliningrad region, which is part of Cramo Lithuania.

The merged company will have revenues of €52 million, around 400 employees and 22 rental depots, making it the leading rental company in both Russia and Ukraine.

The two companies say that the rationale for the transaction is to enhance shareholder value by creating a single stronger player which will have increased financial resources and organisational capabilities to capture the current growth opportunities in the Russian and Ukrainian markets.

Ramirent chief executive Magnus Rosén said: “The Russian and Ukrainian markets offer significant growth potential for equipment rental and through the joint venture we have a strong foundation to invest for accelerated growth. Combining our efforts, we will be able to present a compelling value proposition for both new and current customers, to further develop the rental industry as a whole in these markets”.

Cramo chief executive Vesa Koivula added: “For a few years it has been evident that Russia and Ukraine are in the early phase of developing a modern rental industry. The construction market is huge and the momentum is significant. Taking the lead in the rental industry offers interesting opportunities, but also big challenges. The combined resources of our already successful businesses give us a clear head start and a unique platform for a long-term commitment in Europe’s most interesting region”.

Cramo’s Russian operations comprise of nine locations with revenues of €19 million, while Ramirent has seven outlets in Russia and six in Ukraine, plus a six location operation with ‘shop-in-shop’ partners. Revenues this year are expected to be in the region of €33 million.

The two companies will each hold 50 percent of the shares in the joint venture which will be registered in Finland and will have its own identity- Fortrent. In order to reach equal ownership in the joint venture, Cramo will pay Ramirent €9.2 million in cash to compensate for the fact that its Russian business is smaller.

Anton Artemiev, previously a senior manager with Carlsberg covering the Russian market, will be the chairman of the new company. Other board members will be appointed later.

The transaction is subject to approval of competition authorities, and is expected to complete in January 2013.

Vertikal Comment

This is something of a surprise but actually quite rational, the two companies are rivals all over Europe and with Ramirent several year’s ahead of Cramo in the Russian market it would have been hard to have predicted such a merger.

It does though make excellent sense, while Russia is on the growth curve again, it is a notoriously challenging and risky country in which to do business. My merger their operations both of them increase their ability to capitalise on the current upward trends while at the same time reducing their risk.

The transaction shows a maturity among the senior managers of the business, which is not always present in the construction rental sector. The move and the spirit behind the deal should also play well to the shareholders of each company.

There will be challenges with merging the two entities at a personnel and local management level. Although this should be helped by the fact that the business will be a separate entity with a strong independent chairman.

An interesting move