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By Emma-Victoria Farr and Markus Wacket
FRANKFURT/BERLIN (Reuters) – CVC is improving its offer for Deutsche Bahn’s logistics business Schenker, with the private equity firm asking for a fair assessment of its bid by the German railway’s board and supervisory board in a letter seen by Reuters on Monday.
The letter said CVC is guaranteeing Deutsche Bahn at least one billion euros in the event of a potential future IPO exit, if the German government decides to remain an investor.
Deutsche Bahn wants to sell Schenker in order to concentrate on the German railway’s crisis-ridden core business and reduce its debt burden of more than 30 billion euros ($33.14 billion).
Last month, CVC presented two bids, one for 100% of Schenker that would value it around 14 billion euros, and another with an option that could see Germany reinvest with a minority stake, increasing its offer up to 16 billion euros.
CVC’s offers for Schenker were “neither presented in detail nor discussed” during a special steering committee meeting regarding the sale on Sept. 6, the letter said.
The investment group’s bids are supported by a consortium of Singapore sovereign wealth fund GIC, Abu Dhabi Investment Authority (ADIA) and Qatar Investment Authority (QIA) which will act as equity providers in the transaction, the letter said.
“The most important criterion remains that a sale must be economically advantageous for the railway,” a spokesperson for Deutsche Bahn said.
“A decision on the sale of DB Schenker will be submitted to the supervisory board of Deutsche Bahn for final approval at the end of the process. It also requires the approval of the federal government,” they added.
CVC, which declined to comment, is competing against a rival offer for Schenker from Danish freight forwarder DSV, which was slightly ahead in the bidding race, sources told Reuters last week.
DSV’s offer for all of Schenker also values the company at around 14 billion euros.
German labour union Verdi in a positioning paper last month warned against selling Schenker to DSV, fearing potential job losses resulting from the proposed combination.
Schenker employs almost 15,000 people in Germany and more than 70,000 worldwide.
A steering committee made up of state secretaries from the German government coalition discussed the sale last week. The responsible government ministers are considered to be crucial to the sale of Schenker by the state-owned railway company.
“In the increasingly challenging economic and geopolitical situation, Germany cannot afford to lose another domestic and strategically important industrial champion,” CVC’s letter said.
($1 = 0.9051 euros)
(Reporting by Emma-Victoria Farr and Markus Wacket; Editing by Kirsti Knolle, Andrea Ricci and Alexander Smith)