British government sells Eurostar interest for $1.1 billion

AP News
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Posted: Mar 04, 2015 7:28 AM
British government sells Eurostar interest for $1.1 billion

LONDON (AP) — The British government has agreed to sell its stake in Eurostar, the high-speed rail service that connects London with Paris and Brussels through a tunnel under the English Channel, for 757 million pounds ($1.1 billion), a move that's prompted accusations that it is selling the family silver.

The Treasury said Wednesday that a group of international investors, Canada's Caisse de depot et placement du Quebec and U.K.-based Hermes Infrastructure, agreed to buy the government's 40-percent stake for 585.1 million pounds.

Eurostar, which began services in 1994 and has carried 150 million passengers, also agreed to redeem the government's preference share — a share that carries no vote but ranks higher than ordinary shares when dividends are paid out — for an additional 172 million pounds.

The national railways of France and Belgium, SNCF and SNCB, could still stymie the bid as they have, in their capacity as co-owners, the option to buy the U.K. government's stake but at a 15 percent premium. The closing of the deal depends on both declining to exercise that right, as well as regulatory approval.

Treasury chief George Osborne said the deal announced Wednesday was "a fantastic deal for U.K. taxpayers that exceeds expectations." The sale is part of the government's plan to sell off some 20 billion pounds in assets by 2020. The proceeds will be used to reduce the national debt.

Critics, such as Manuel Cortes of the TSSA rail union described it as a fire sale of an important national entity, comparing it to privatizations under the late Prime Minister Margaret Thatcher in the 1980s. Eurostar's services have been generating a lot of custom over the past few years with 10 million passengers in 2014 alone. Eurostar is also set to roll out new trains this year.

"George Osborne, because of his outdated belief in unvarnished Thatcherism, is once again selling off the family silver for short-term financial gain," he said. "The reason that France and Belgium already own the majority stake in Eurostar is that they believe in running a publicly-owned railway for the benefit of everybody."

Canada's CDPQ manages public pension funds. Hermes Infrastructure is a fund managing about 3 billion pounds for its clients.