German Railway Company Deutsche Bahn may receive approximately 15 billion euros for Schenker.

Remaining four competitors in the running.

2024 May 24 . 7:43 PM

2 min read

A Schenker sale could reduce the rail group's debt burden.

German Railway Company Deutsche Bahn may receive approximately 15 billion euros for Schenker.

A potential sale of German logistics division Schenker could inject much-needed funds into Deutsche Bahn, which is struggling with a massive debt hurdle exceeding 30 billion euros. The divestment of this subsidiary could potentially provide the company with close to half of its debt balance.

An insider source indicates that Deutsche Bahn may receive more than 15 billion euros from the remaining bidders in the Schenker sale. The state-owned company is engaged in negotiations with four prospective buyers. These include a strategic investor, a financial investor, a European representative, and one from the Arab world. The blind offers from these buyers range anywhere from below 15 billion euros to more. CVC, the only financial investor so far, is reportedly making a play for Schenker.

Previously, there had been six bidders vying for the acquisition of Schenker. In addition to the financial investor, these included Danish firm DSV, shipping companies Maersk and MSC, Saudi investor group Bahri, and Abu Dhabi’s sovereign wealth fund ADQ. However, ongoing talks between these players has resulted in a reconfiguration of consortia. Conspicuously absent from the current bidding group is the US investment company Carlyle, which initially competed with CVC. Instead, it seems that Carlyle has formed a coalition with ADIA and the GIC fund from Singapore. Neither ADIA nor CVC or Carlyle have replied to our inquiry for comments. GIC has yet to offer a statement.

Decreasing debt is a top priority for Deutsche Bahn

Deutsche Bahn declined to comment on the selection of the four bidders. Its spokesperson merely highlighted that as of this week, it had not received any concrete offers from interested parties. "The process is progressing as scheduled."

The motivation behind selling Schenker is to stay focused on its primary rail operations in Germany and to alleviate Deutsche Bahn's debt burden of roughly 34 billion euros. This measure is crucial to maintain the company's creditworthiness, as the escalating interest expenses on the debt could hamper its financial stability.

Interestingly, Schenker has been the primary profit driver for Deutsche Bahn for a long time. Skyrocketing freight rates during the COVID-19 pandemic yielded colossal profits of about 1.8 billion euros in 2022. However, these record profits dropped to around one billion euros in 2023 once business resumed at normal levels. Thus, Schenker was no longer able to subsidize the loss-making divisions of Deutsche Bahn.

Deutsche Bahn had acquired Schenker around 20 years ago for approximately 2.5 billion euros while they hoped to leverage synergies between the rail and logistics divisions. Unfortunately, the targeted synergies hardly materialized, and Schenker employs around 70,000 individuals across 130 countries, including more than 15,000 in Germany.