Berlin agrees to rail sell-off

29th April 2008, Comments 1 comment

Social Democrat leader Kurt Beck confirmed the agreement, which calls for 24.9 percent of passenger and freight transport to be privatized.

Berlin -- German Chancellor Angela Merkel's ruling coalition agreed late Monday to a plan to sell off shares in the state-owned railway company, Deutsche Bahn AG, which is expected to raise about six billion euros (9.5 billion dollars).

Social Democrat leader Kurt Beck confirmed the agreement, which calls for 24.9 percent of passenger and freight transport to be privatized.

The rail network and stations are to remain 100 percent in state hands.

Leading members of Merkel's conservative bloc had already signaled support for a partial privatization plan drawn up by the junior members of the coalition, the Social Democrats, which called for selling off a 24.9 percent stake in Europe's biggest railway group.

While this fell short of the 49.9 percent that Merkel and leaders of her conservative bloc had been arguing for, senior members of her party indicated that 24.9 percent would end up being the first tranche of shares sold off in Deutsche Bahn.

Despite a plunge in the number of companies making their share market debut as a result of the global financial crisis, Deutsche Bahn chief Hartmut Mehdorn was hopeful that he can launch the partial sell-off of what is one of the world's biggest transport groups later this year.

Ahead of Monday's coalition parties' meeting, Deutsche Bahn reached an accord with unions ruling out layoffs for the next 15 years as a result of the rail company's partial privatization.

Under the SPD privatization plan, the government would retain 75.1 percent of Deutsche Bahn's passenger and freight operations.

Berlin would also retain complete control of Deutsche Bahn's railway stations as well as its 34,000 kilometers of track network and energy supplier operations.

Money raised from Deutsche Bahn's stock market debut are expected to go to both the government and to Deutsche Bahn.

In reaching a deal, the SPD also backed off a proposal that the Deutsche Bahn stock should be sold as part of a people's share action, which some analysts said could open the door for the bulk of the IPO finding its way into the hands of big institutions.

The build-up to this month's scheduled decision on the sale of shares in Deutsche Bahn came after the group announced that profit last year rose 2.1 percent to 1.72 billion euros (2.72 billion dollars).

Deutsche Bahn forecast a rise in sales of about 5 percent in 2008 after saying 2007 sales jumped by 4.2 percent to 31.3 billion euros.


1 Comment To This Article

  • Sean posted:

    on 29th April 2008, 11:17:26 - Reply

    Is there something I don't understand about privatization? If you put organizations that can not possibly have competition (like the rail system) into private hands, are they really going to spend revenue to keep the system efficient and useful, or to turn a profit? It seems like the latter is the more likely.