By Markus Wacket and Emma-Victoria Farr
BERLIN/FRANKFURT (Reuters) -German rail operator Deutsche Bahn's management board has asked its supervisory board for the go-ahead to prepare a sale of its international logistics subsidiary Schenker, documents reviewed by Reuters showed on Thursday.
The formality would allow management to "examine and prepare a sale of up to 100% of the shares in Schenker," the internal documents state ahead of a supervisory board meeting next week.
This gives the state-backed train company the opportunity to consider a complete or partial sale to Schenker's competitors or to financial investors.
An IPO would also be possible, although this is currently considered unlikely in the volatile market environment.
A spokesperson for Deutsche Bahn declined to comment.
A formal bank mandate has not yet been awarded, according to two sources familiar with the matter. Formal pitches are expected in January, the sources said.
Schenker, which provides logistics for sea, land and air freight, recently accounted for more than a third of Deutsche Bahn's sales. In the first half of 2022, Schenker achieved an operating profit of almost 1.2 billion euros ($1.26 billion), putting the entire group back in the black.
In the wake of the COVID pandemic and strained supply chains, logistics operators have been in demand, and prices for sea and air freight have risen sharply.
"The cash flows generated as part of a sale remain entirely within the Deutsche Bahn Group," the proposal document continues. This should help reduce the rail operator's debt burden of around 30 billion euros.
However, a final decision on a sale has not yet been made. Tough financing conditions could also lead to a decision not to sell, particularly if Deutsche Bahn is not satisfied with price, two sources said.
Strategic bidders would find it easier to finance the estimated 15-20 billion euro transaction with only equity, one of the sources said. Private equity would struggle to finance such an amount unless Deutsche Bahn decided to part with a minority stake instead, this source added.
($1 = 0.9505 euros)