Peugeot closer to selling Gefco to Russian Railways image

French carmaker PSA Peugeot Citroen is moving closer to a deal to sell its logistics division Gefco to Russian Railways.

According to a source familiar with the talks quoted by Reuters, the state-owned railway company beat out rival bidders. The source added that Peugeot and Russian Railways are preparing to enter exclusive negotiations, with a sale agreement to be concluded in coming weeks. Both PSA Peugeot Citroen and Russian Railways refused to comment on the matter.

Earlier this year, Peugeot said it planned to raise 1 billion euros by selling a majority stake in Gefco as it struggles to limit mounting losses. Established in 1949, Gefco posted an operating profit of 223 million euros in 2011, with revenues of 3.78 billion euros. 38 percent of revenues came from companies outside Peugeot Citroën.

But why does a state-owned company like Russian Railways want to by Gefco? Well, the logistics company transports cars and car parts around Europe, China and Latin America, which for Russian Railways represents an opportunity to expand its activities beyond its home market. The company, which has a monopoly over a vast network of passenger and freight routes throughout Russia, has entered international shipping in recentt years through a network of subsidiaries.

Russian Railways employs more than 975,000 people and is Russia’s largest employer and one of the biggest in the world.