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DB flotation put on hold

09 Oct 2008

GERMANY: The partial flotation of DB Mobility Logistics AG scheduled for October 27 has been postponed as a result of the turmoil in the global financial markets, which would have impacted on the potential value of the shares. Finance Minister Peer Steinbrück and DB Chairman Hartmut Mehdorn announced the decision in Berlin on October 9, but said that no new date would be set until the market environment improved sufficiently to ensure a successful flotation.

Under the timetable agreed at the end of September, the consortium of banks appointed by DB to float a 24·9% stake in the operating business DB ML had been due to start the formal bookbuilding process for the IPO on October 13, and set the offer price on October 17, ready for the shares to start trading on the Frankfurt stock exchange 10 days later.

There has been growing concern among federal and regional politicians about the viability of the fiercely-contested flotation plan. Steinbrück had expressed doubts earlier this week, questioning whether the anticipated €5bn to €8bn could be achieved in the light of falling share prices in almost every market around the world. Nevertheless DB’s Supervisory Board insisted that there was still strong interest among potential investors.

In the end, Steinbrück decided that the risk to the federal finances of floating DB ML at the wrong time was too great. Transport Minister Wolfgang Tiefensee agreed, noting that the flotation was intended ‘to strengthen the railway and improve the services for its customers’, and that ‘dissipating the shares at less than the true value’ would not achieve the desired result.

Mehdorn pointed out that there had been ‘extremely high volatility and uncertainty in the capital markets, particularly since beginning of this week’, so he had agreed with the federal owners ‘to adapt the schedule’. DB’s Board Member, Finance, Diethelm Sack said the railway would 'watch the state of the market carefully, and remain ready to act at short notice’, adding that ‘in the meantime we will continue the dialogue with potential investors’.

The FDP spokesman in the Bundestag Horst Friedrich welcomed the postponement, insisting that ‘on this point the government and opposition are united’. Given the need ‘to achieve the sale proceeds of €5bn to €8bn which were the basis of the political decision’, he agreed that it was appropriate to wait for ‘a better market environment’.