Russian railway monopoly RZD, is considering selling a blocking stake in Transmashholding (TMH), the largest producer of locomotives and subway cars in Russia and CIS.

This have been recently confirmed by Vladimir Yakunin, head of RZD. According to him, such a possibility is currently discussed by "narrow circle of RZD’s board."

He has also added that RZD has become a shareholder of TMH several years ago in order to support the company and the entire Russian industry of heavy transport machinery.

As a result, TMX managed to attract foreign investors, and in particular French Alstom, and to create conditions for the establishment of a new locomotives’ producer in Russia, which is the Sinara Group.

Due to a current stable situation in the Russian market of rolling stock and high level of competition, RZD, according to Yakunin, has no further plans to remain a shareholder in Transmashholding. Details of the potential transaction and possible bidders are not disclosed.

Russian RZD purchased 25% stake in TMH at the end of 2007 from the current owners of the company - Iskandar Makhmudov and Andrey Bokarev, as well as  Transgroup, one of Russia’s largest company in the field of transportation.

The amount of the deal at that period of time reached 9.3 billion rubles (US$280 million) with a discount of 35% of the market value. The provision of such a big discount was mainly due to the status of RZD as a national railway monopoly, and the company’s promises to attract a strategic investor in Transmashholding.

According to earlier statements of Vladimir Yakunin, that should be a "foreign company, which operate advanced technologies and which has production facilities in Russia. This intent was ratified on March 31, 2009, with Alstom providing ongoing technical expertise for the modernisation of TMH's production sites, and the development of new locomotive platforms; with TMH undertaking more than 75% of the manufacturing. At the same time Alstom took a 25(+1)% stake in TMH's capital holding company.

There is a possibility that Alstom may increase its share in TMH up to 50%. At the same time the Canadian Bombardier could be considered as another bidder for the stake. Finally, the proposed stake may be acquired by the top-management of TMH.

An official spokesman of Alstom Russia has recently said the company "will consider the possibility of the deal». Representatives of Iskandar Makhmudov and Andrei Bokarev declined to comment.

According to estimates of analysts of Russian Ministry of Transport, total value of  Transmasholding is estimated at 130-140 billion rubles (US$6 billion). That means  that the cost of the 25% stake may reach 32-35 billion rubles (US$1 billion).

At the same time there is a possibility that a final price of the deal may be significantly lower, due to the current uncertain situation with TMH’s Luganskteplovoz plant in Ukraine and the projected decline of sales of the company, in the light of the reduction of investment program of RZD during the next several years.

CJSC Transmashholding currently remains the largest manufacturer of locomotives and rail equipment in Russia, with annual sales of US$3.2 billion and a workforce of 55,000 people in 2008. The company includes 14 engineering and production sites in Russia and one production and engineering site in Germany.

In 2012, Transmashholding took in 130 billion rubles in revenue. This revenue represents a 22 percent increase over 2011 revenues.

Russian Railways is the company’s biggest customer. Transmashholding has major customers in Bulgaria, Belarus, Kazakhstan, Ukraine, and Serbia. The company manufactures and sells subway cars, passenger diesel locomotives, diesel engines, freight cars, flat cars, and diesel trains.