(Oct 13): The U.K. government has started the sale process of its stake in English Channel tunnel passenger train operator Eurostar International Ltd. as it seeks to raise billions of pounds from asset disposals and reduce public debt.
Chancellor of the Exchequer George Osborne is inviting expressions of interest from potential buyers of the government’s 40 percent holding in Eurostar, which is majority owned by France, according to a statement released by the Treasury. Interested parties have until Oct. 31 to respond, and the government expects to achieve definitive agreements in the first quarter next year.
The disposal is part of a plan to shed 20 billion pounds ($32.1 billion) of assets by 2020 as the government seeks to lower borrowings and shift more companies out of state ownership. Seven months before a general election, Osborne is positioning his Conservatives as the political party of economic credibility, and last month said further public-spending cuts or tax increases are needed in order to balance the budget.
“I am determined that we go on making the decisions to reform the British economy and tackle our debts,” Osborne said in the statement. “The sale proceeds would make an important contribution to the task of reducing the public sector debt.”
Eurostar, whose core routes link London with Paris and Brussels, carried 10.1 million passengers in 2013 and had an operating profit of 54 million pounds on sales of 857 million pounds. The company is seeking growth through the addition of additional European destinations, while facing competition from Deutsche Bahn AG, Europe’s biggest rail operator, which plans London services.
French Government
The U.K. is the No. 2 shareholder in Eurostar, with the French government holding 55 percent via state rail company SNCF, or Societe Nationale des Chemins de Fer Francais. Belgian state railway SNCB owns the remaining 5 percent.
Eurostar paid a dividend of 18.6 million pounds to its owners in 2013, of which the U.K. received 7.4 million pounds. In 2012, Britain got a dividend payout of 6.5 million pounds from a total of 16.3 million pounds.
The Sunday Times reported this month that the stake is worth about 300 million pounds, and Paris-based Antin Infrastructure Partners and Ardian, the private-equity firm spun out from AXA Group, are considering bids.
The disposal doesn’t include any track assets or involve Groupe Eurotunnel SA, which is a separate listed company that manages the Channel Tunnel and operates rail shuttles that carry vehicles through it.
The government published its pre-qualification letter today, and UBS AG is advising the government on the sale.
Biggest Expansion
The disposal comes as Eurostar gears up for its biggest expansion in years, with new e320 trains ordered from Siemens AG due to link London with Amsterdam from December 2016, with stops in Antwerp, Rotterdam and Amsterdam’s Schiphol airport.
At the same time, it faces new competition as Deutsche Bahn plans services from Germany to London via the Channel Tunnel. Eurostar is also seeking more transfer customers as the addition of direct trains to Lyon, Avignon and Aix-en-Provence showcases options for using its routes in long-distance trips.
The company also aims to expand beyond tunnel services through a joint bid with the Keolis unit of SNCF for the right to operate the U.K.’s East Coast link between London and Edinburgh.