The saga of the privatisation of Deutsche Bahn (DB) has moved forward by another few steps over the past two weeks, with some sort of final decision taken by the politicians over the company’s future and an indication of the future strategy for the prospective semi-private company.

At the beginning of November the German Parliament passed a bill for the partial privatisation of the company. This is a compromise, with a stake of 49% being put up for sale and the company being partly divided between the track operation and the rest of Deutsche Bahn which includes Schenker and Bax Global.

A major sticking point was the issue of integrated ownership of the track. The more free-market inclined members of Angela Merkel’s CDU party pressed for better access for new entrants into rail services in Germany by removing DB’s ownership of the track. This was opposed by the SDP who feared job losses amongst the membership of the trade unions. It was also opposed by DB’s management.

The compromise agreed is to separate the track ownership from DB, but to give DB a seven year contract for its operation. This, it is hoped, will preserve the status-quo in terms of employment without putting in place a permanent monopoly.

It is suggested by the politicians that the sale will go ahead in 2008 or 2009. Hartmut Mehdorn, the CEO and Chairman, of DB would prefer 2007. He also suggests the price for the stake is ?9bn.

The nature of the sale remains unclear. Whilst Mehdorn and others are talking about an Initial Public Offering, some form of private sale is possible. It is worth noting that the amendment to prevent a single share-holding of more than 25% was struck-out of the privatisation bill, although since DB will remain controlled by the German state through its 51% holding, a straight takeover is out of the question. However a break-up of the rail business and its recently acquired Schenker and Bax Global businesses is conceivable.

Not that this prospect is considered for a minute by Hartmut Mehdorn. In a letter to German politicians that appeared in the press last week, he outlined his aspirations in a characteristically aggressive expansion strategy. This included a ?2bn ‘investment’ in developing container port facilities in Hamburg, a further ?3bn for purchasing central European rail businesses and/or assets. He also states that a further ?2bn would be spent on logistics activities although it is unclear what these would be and whether it would include further acquisitions. This growth in logistics would be paralleled by expansion in passenger services, especially at the international level.

Hartmut Mehdorn clearly has not satiated his ambition for DB despite its rapid growth and present high profits. With the German Government promising only around ?2.5bn of capital investment for the DB business, Mehdorn’s ambitions do seem to rest on raising substantial amounts of capital through other means. It is also clear that he intends to create a European logistics company that will be rivalled only by Deutsche Post World Net in size. Whether he can find shareholders willing to finance such ambitions in the long-term is another question.

Source: Transport Intelligence

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