The Government has struck a deal to sell its Eurostar stake to a consortium of investors, including the stewards of Canadian pension savings.
The Treasury announced this morning that it will generate £585.1m in revenues from the sale of its 40 per cent stake in the Channel Tunnel train operator.
Ministers stressed this represents a premium on the £300m price that was widely touted when the Chancellor first invited offers for the stake last October.
“It’s great that we have reached an agreement to sell the UK’s shareholding in Eurostar which delivers a fantastic deal for UK taxpayers that exceeds expectations,” George Osborne said.
Eurostar will also redeem the Government’s preference share in the company on the completion of the sale, raising an extra £172m for the Exchequer.
Three-quarters of the stake will go to La Caisse de dépot et placement du Québec (CDPQ), which manages the pension savings of workers in the Canadian province. A quarter will go to the UK-based infrastructure investor Hermes. The Treasury said that, providing the deal receives the approval of regulators, it should close during the second quarter of 2015.
The remaining stake in Eurostar is owned by the French and Belgian national railway companies. They have pre-emption rights, meaning they could yet acquire the UK’s 40 per cent share by paying a 15 per cent premium on the agreed price. But that is considered unlikely considering the two countries showed no interest in bidding when the original offer was announced. And Treasury sources said there was no reason to expect them to seek to upset the sale on political grounds given the French have worked with the CDPQ in the past.
The deal is the latest chunk of UK rail infrastructure to be snapped up by Canadian money. Two other Canadian pension funds – Borealis and the Ontario Teachers’ Pension Plan – paid £2.1bn for the 20-year contract to run the High Speed One line in 2010. CDPQ has an investment portfolio valued at C$10bn (£5.2bn), while Hermes Infrastructure manages around £3bn on behalf of clients.
Last autumn the Treasury outlined plans to raise £20bn from state asset sales by 2020, with the proceeds earmarked for reducing the national debt. Last week the Government announced another sale of its shares in Lloyds Banking Group, taking its stake below 24 per cent. It has now raised nearly £8bn from sales in the bank, which had to be rescued with public money in 2009.
However, the Government has repeatedly had to shelve plans to sell any of the 80 per cent stake in the bailed-out Royal Bank of Scotland.
The Government sold two thirds of the Royal Mail for 330p a share in October 2013 but the equities were soon trading at 600p, prompting accusations that ministers had sold off the company on the cheap (although the share price has since come down to 424p).
Eurostar began service in 1994 and had more than 10 million passengers in 2014. “We are investing in one of Europe’s most efficient intercity transport systems” said Macky Tall of CDPQ. “Alongside leading industry players, we are becoming partners of a highly strategic asset that will generate stable and predictable returns for our clients.”