by Phil Marsh

Two of our train companies sold – but who really owned them?

Published: 4th March 2015

Freightliner and Eurostar sold to North American organisations

Most regular rail passengers will have seen Freightliner green liveried freight trains in many parts of the UK rail network and international passengers travelling to or from London will be used to Eurostar services which have been running for over 20 years.

Both companies were sold at the start of March with Freightliner the first to be sold. The company was sold to Genesee & Wyoming Inc. (GW) by their ultimate owners, Arcapita, ending a seven year majority shareholding. It is understood that the sale was forced by liquidity problems and had been known about for the last six months or so.

They said:

Russell Mears, Chief Executive Officer of Freightliner Group said; “Genesee & Wyoming brings additional investment firepower, extended international reach and increased below‎ rail infrastructure expertise to add to the existing strengths of the Freightliner Group. Their commitment to safety and service quality in all activities also mirrors our own values."

Jack Hellmann, President and Chief Executive Officer of Genesee & Wyoming Inc. said; “The acquisition of Freightliner is an excellent strategic fit for G&W. We are excited to be adding a world class intermodal and heavy haul franchise in the United Kingdom that will be the foundation of G&W’s European Region. Further, the overlap of our respective rail businesses in Australia and the Netherlands will unlock operating synergies and expand our presence in each of those markets.

Working together, we expect to build the existing business and also unlock a range of attractive rail investment opportunities worldwide.

It seems that the skills of Freightliner’s 2,500 staff will be mixed with those of the new owners and combine their respective best practices to enhance the overall operation.

Eurostar sold to Canadian and UK investment funds by The Treasury.

The Government has sold their 40% stake in Eurostar to for £757million and the sale is expected to complete by the end of June, just after the election.

The announcement was made by The Chancellor, George Osborne, and the Chief Secretary, Danny Alexander and the purchaser is a consortium of Caisse de dépôt et placement du Québec (CDPQ) and Hermes Infrastructure.

They will pay £585million, far more than envisaged, in October 2014 when the intention to sell was announced. When the sale goes through, Eurostar will redeem the Government’s preference share generating a further £172m for the exchequer.

The official statement says that government’s key objective in the transaction was to maximise value for money for the UK taxpayer, and this has been achieved. It also says that the sale price achieved is significantly ahead of expectations, reflecting the high quality nature of the asset.

Eurostar’s passenger numbers increased again last year to well over 10 million and the company is testing new 320kph trains and about to serve the south of France with direct services from London.

Who are the purchasers?

CDPQ is a 50 year old long-term institutional investor that manages funds primarily for 33 public and para-public pension and insurance plans. At the end of 2014 it managed C$226 billion in net assets and is one of Canada’s leading institutional fund managers. It invests worldwide in major financial markets, private equity and real estate and brings, they say, a strong track record of global infrastructure investment, with an investment portfolio valued at over C$10 billion.

The partner, Hermes Infrastructure is part of Hermes Investment Management is a UK-based fund managing approximately £3 billion and runs a diversified infrastructure portfolio. The new shareholders will be working with French and Belgian Railways who own the other shares. The sale is conditional on these railways not exercising their Pre-emption Right and also on regulatory approval.

They said;

Chancellor of the Exchequer, George Osborne said: It’s great that we have reached an agreement to sell the UK’s shareholding in Eurostar that delivers a fantastic deal for UK taxpayers that exceeds expectations.

Investing in the best quality infrastructure for Britain, getting the best value for money for the taxpayer and tackling our country’s debts are key parts of our long term economic plan, and in today’s agreement, we are delivering on all three.

Chief Secretary to the Treasury, Danny Alexander said:

There’s no virtue in the government owning assets it doesn’t need to. That’s why, as part of the National Infrastructure Plan, I announced an increased target to sell commercial and financial assets worth £20 billion between 2014 and 2020. This included our shareholding in Eurostar, a truly market-leading business. And this sale, at a much higher price than market expectations, is a model example of how this government is securing great value for money for tax payers as it helps rebalance and rewire our economy.

Macky Tall, Senior Vice-President, Private Equity and Infrastructure, CDPQ, said: Today we are investing in one of Europe’s most efficient intercity transport systems. Alongside leading industry players, we are becoming partners of a highly strategic asset that will generate stable and predictable returns for our clients.

This major investment is another opportunity for us to further build on our expertise in the transport sector, while broadening our footprint in the global marketplace. In terms of reliability and satisfaction, Eurostar is state-of-the-art and among the most enviable worldwide. It serves as a model for operational efficiency and we intend to be a partner in its growth for many years to come.

Peter Hofbauer, Head of Hermes Infrastructure, said: Eurostar is a high quality asset providing a direct link between the UK and Europe that has historically offered attractive investment characteristics, including long-term stable and predictable cash flows. We look forward to creating a long-term partnership with SNCF and SNCB and other key stakeholders in relation to this important investment.

These sales give a small hint as to who really owns our high profile rail companies.

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