Deutsche Bahn: To be or not to be… privatised?

Posted on April 23, 2008 by Matthieu Desiderio

Whether or not Deutsche Bahn AG (DB) will be privatised is no longer a topical question. An agreement was finally reached within the Social Democratic Party of Germany (SPD, Sozialdemokratische Partei Deutschlands). Among the several options that were initially considered (e.g. excluding local passenger transportation activities from the privatisation process, or extending shares without rights to vote), Kurt Beck’s party voted for a partial privatisation, by selling 24.9% of the shares owned by the German Government.

Ronald Pofalla, Secretary of the Christian Democratic Union of Germany (CDU, Christlich Demokratische Union Deutschlands), showed his satisfaction with the SPD decision. Even though the CDU voted for a larger privatisation (up to 49% of the shares sold), the SPD choice is a real step foward. Next discussions involving both the CDU/CSU and the SPD will be held on April 28. Parties will now decide in common to which extent DB shall be privatised: it is likely to think that the 24.9% threshold will be the final choice.

Under 25% is not enough to be quoted on the stock market…

Some experts however agreed on saying that if not more than 25% of the German Government shares are sold, DB will not be listed on the DAX stock exchange by the end of the year. On the other hand, Hartmut Mehdorn (DB CEO), as well as other experts working on this issue, all expect that this transaction would generate €4 to €6 billions.

The DB, which will be renamed DB Mobility & Logistics, will launch a broad advertising campaign in order to appeal potential investors interested in the DB privatisation. Furthermore, DB is getting ready for new takeovers on companies in Italy and Great Britain, an issue that Transport Expertise will follow up with in the coming weeks.

Privatisation process: Request For Proposals due May 5, 2008

To manage the privatisation process, the German Ministry of Finance announced a Request For Proposals early April, and proposals are due by May 5, 2008. A consortium will be entrusted the whole management of the privatisation process of the German rail operator. The consulting group that will be selected will be assigned with several missions:

defining a strategy to attract investors from the private sector;
preparing and implementing the strategy defined;
supporting the German Ministry of Finance during the whole process; and
producing the final report.

The partial privatisation plan will allow DB to finance its future investments, only a few years before the opening the passenger rail operation market to competition. Also, the German Ministry of Finance hopes the shares it will sell to the public when it will privatise DB will allow the federal State not to borrow money from banks anymore (starting in 2011). With recent SNCF moves to become a global worldwide logistics provider, it seems the competition between the two main European rail providers is just starting…

References

Article: Le dossier de la privatisation de la Deutsche Bahn progresse, Les Echos, Apr. 15, 2008: here
Article: Deutsche Bahn : la privatisation prend tournure, Le Figaro, Apr. 15, 2008: here
Article: Deutsche Bahn : le SPD veut limiter à 24,9% la privatisation du capital, Les Echos, Apr. 15, 2008: here

HH, MD

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