Britain agreed to sell its 40 per cent stake in the Eurostar rail link for £585 million to a consortium comprising the Canadian public pension fund Caisse de Depot du Placement du Quebec (CDPQ) and the British asset manager Hermes.
The government announced the deal for its stake in the high-speed rail link between Britain and continental Europe yesterday following a competitive sale process begun in October by finance minister George Osborne.
Osborne said the price tag had “exceeded expectations”. According to 2013/14 government accounts, the share capital value of the stake was £325 million. Investment bank UBS advised the government on the sale.
The deal is part of a trend for institutional investors such as pension funds and insurers to push into infrastructure projects as they are squeezed by low interest rates globally.
Such investments are high-yielding and match the long-term liabilities in pension and savings schemes, but a lack of attractive schemes has pushed up prices.
The finance ministry said it expected the deal to be completed by the second quarter of 2015.
The consortium, Patina Rail LLP, will result in CDPQ, which has an infrastructure investment portfolio valued at more than 10 billion Canadian dollars ($8.02 billion), owning a 30 per cent stake in Eurostar.
Hermes Infrastructure, part of British-based fund Hermes Investment Management, will take a 10 per cent stake.
The sale is part of a national plan to raise £20 billion by selling off publicly owned assets to pay down Britain’s national debts and help rebalance the country’s books.
The deal will generate an additional £172 million pounds for the UK Treasury upon completion because Eurostar has agreed to redeem the government’s preference shares, a finance ministry statement said.
The remaining 60 per cent of Eurostar is held by French rail operator SNCF, which has a 55 per cent stake, and Belgian national rail operator SNCB, which has a 5 per cent stake.
Successful completion of the deal depends on regulatory approval and existing shareholders not exercising their option to acquire the British stake at a 15 per cent premium, the Treasury said.