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UK invites interest in buying 40% stake in Eurostar

13 Oct 2014

EUROPE: The British government formally invited expressions of interest in buying its 40% stake in cross-Channel high speed train operator Eurostar International Ltd on October 13.

Potential bidders have until October 31 to respond, with the government saying its key objective is to ‘maximise value for money for the UK taxpayer, which will be achieved through a combination of value maximisation, risk transfer and enabling the continued operation of EIL.’ Subject to achieving this, the government expects to reach a definitive agreement in the first quarter of 2015. UBS Ltd has been appointed as the Treasury’s exclusive financial advisor for the sale.

French national operator SNCF which owns 55% of EIL and its Belgian counterpart SNCB which owns 5% have undertaken not to participate in the sale of the UK stake, except in accordance with their right to acquire ordinary shares at a 15% premium over the successful final bid.

Upon completion of a sale, the shareholders would enter into a revised shareholders' agreement. SNCF would have five board members, the new investor three and SNCB one. There would also be three executive directors, plus an independent non-executive chairman and two independent non-executive directors.

SNCF would have operational control of EIL and will ‘fully consolidate’ EIL in its accounts. However, the 40% stake will come with minority protection rights in relation to: changes in the nature or scope of the business; major investments, acquisitions and disposals; major contracts, joint ventures and partnerships; related party transactions; capital structure; and changes to the dividend policy.

In its briefing document to potential bidders, the UK government says Eurostar is a ‘leading rail operator in one of Europe’s most attractive corridors’, offering attractive opportunities including a ‘new service to Amsterdam from December 2016 and Lyon/Provence from May 2015’. There is also the potential for connecting services to Germany and regional destinations in the Netherlands, France and Switzerland.

The 10 new Siemens Velaro e320 trainsets to be delivered from the end of 2015 would have ‘significantly lower operating and maintenance costs’ than the current fleet of TMST sets dating from the launch of services, plus a ‘20% increase in capacity to capture currently unmet peak demand’. According to the briefing document, ‘the TMST trains that will remain in the fleet will be completely refurbished and used for some London – Brussels services and other routes beyond Paris.’

Eurostar results
  2011 2012 2013
Passengers, million 9·7 9·9 10·1
Sales revenue, €m803 799 857
Total revenue, €m824·7 829·4 882·2
Total operating expenses, €m (737·7) (713·3) (749·1)
EBITDA, €m 87·0 116·1 133·1
Net profit, €m 20·8 88·0 72·3