Transportation specialist Great Circle Capital has purchased a $21.1 million (€15.3 million) minority stake in STS Logistics, a Russian freight forwarding, warehousing and customs services provider.
Great Circle currently manages a $190 million emerging markets fund, which targets leveraged buyout and expansion capital investments in the transportation sector.
This is the fund’s second investment in Russia. Last July the firm invested $20 million in Russian Logistic Service, a company that provides domestic and international freight forwarding and transportation services to local and international companies.
Paul Rapello, a partner at Great Circle, told PrivateEquityOnline that the Russian economy presents an interesting opportunity for his firm at the moment.
“We want to capitalise on the growth of the underlying Russian economy as it diversifies away from an oil- and gas-based economy,” Rapello said.
He cited the logistics sector as one of the most dynamic. The sector, once dominated by trucking and freight forwarding, is changing its focus to warehousing and warehouse management.
Great Circle’s investment is largely earmarked to help STS take advantage of this trend by expanding its warehousing business, Rapello said. STS will expand into other services as well, and will also look for small bolt-on acquisitions.
Great Circle initially struggled to find limited partners when it launched its fund in 2002 with $55 million of backing from US state agency Overseas Private Investment Corp. After management changes – founders Robert Burke and Kevin Kennedy sold their stakes to Rapello and Hew Crooks – the firm attracted $70 million from Alfa Capital Partners, the investment arm of Russia’s Alfa Bank, and Belgian real estate company Probel Capital Management, as well as an additional $110 million from OPIC.
Transportation has been a particularly attractive sector for private equity of late. This year alone, Apollo won a heated, $2 billion bidding war for Texas transportation firm EGL; UK mid-market shop Close Brothers made an estimated 4x return on United Transport International, a freight logistics company, and also sold its stake in shipping firm V. Ship; and US firm Hicks Holdings and Bahrain’s Investcorp teamed up purchase a substantial portion of Greatwide Logistics Services from Fenway Partners for $730 million.