Germany: rolling stock

Germany has not seen a single initial public offering (IPO) so far this year, as financial market turmoil deters potential candidates.

Berlin hopes national rail operator Deutsche Bahn, Europe's largest railway company, and Germany's last major privatisation, will loosen the turgid market. Germany's governing coalition of conservatives and Social Democrats meet Monday to sign off on a slimmed down privatisation of the company's rolling stock and logistics, one of Chancellor Angela Merkel's few remaining economic reform targets.

Merkel had originally envisaged selling a 49.9% stake; only recently, the OECD urged Germany to separate railway services and infrastructure. Now the upper limit of the flotation has been cut to 24.9% -- preventing private investors from having seats on the supervisory board -- while the state retains 100% of the infrastructure (stations and rail network). This is estimated to raise up to 7.9 billion dollars.

If the 24.9% cap is agreed by the coalition on Monday, a further offering of government shares is unlikely in the near future. Moreover, the proposed limitations for private investors as well as ongoing labour disputes at DB reduce the attractiveness of the company for hedge funds and sovereign wealth funds. Given current global financial liquidity constraints, it could prove difficult to find a suitable private investor.