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German government delays Deutsche Bahn IPO

Latest update : 2008-10-09

The German government has postponed the initial listing of shares in the country's railway operator Deutsche Bahn to an unspecified date in the context of turbulent stock markets. The company's partial privatisation was planned for October 27.

The German government delayed a multi-billion euro initial public offering (IPO) of rail operator Deutsche Bahn on Thursday, citing extreme turbulence and uncertainty on global financial markets.

Expected to be Germany's largest IPO in eight years, the partial privatisation of Deutsche Bahn had been set for Oct. 27 but was pushed back to an unspecified future date that will depend on an improvement in market conditions, the German finance ministry and the company said on Thursday.

Deutsche Bahn, which had firmly rejected any suggestions of delay for weeks, was the latest IPO casualty of the global crisis after other flotations were called off in recent weeks.

"In face of the extremely high volatility and uncertainty on global capital markets, especially since the beginning of this week, we have decided together with our owner, the federal government, to adjust the time plan," Deutsche Bahn CEO Hartmut Mehdorm was quoted as saying in a statement issued by the ministry.

Sources close to the firm said earlier it could be postponed until next spring.

"As soon as the market environment permits a successful initial public offering, we're ready to go," German Finance Minister Peer Steinbrueck said in the statement. "The Bahn IPO will happen."

Mehdorn has been pressing for years to sell a stake in the company in order to help finance expansion. After years of political wrangling, Chancellor Angela Merkel's government overcame internal differences and cleared the way for the October listing.

Shares representing 24.9 percent of Deutsche Bahn's Mobility Logistics unit were due to be offered to private and institutional investors inside Germany and to institutional investors abroad through a private placement.

But concerns about the timing of the part-privatisation had grown as a result of sharp stock market falls around the world. The DAX index of leading German stocks has fallen about 39 percent this year. It is down 15 percent this month alone.

The global market for IPOs collapsed in the third quarter of this year in its worst performance since early 2003, data from Thomson Reuters has shown.

On Wednesday, German solar technology company Schott Solar said it had decided to call off its IPO, pointing to the "dramatic deterioration in international capital market conditions in the past days".

Earlier this week, Steinbrueck had publicly questioned the timing of the Deutsche Bahn flotation due to the crisis in world markets. But Deutsche Bahn responded there had been no negative signs for the IPO from the market.

Analysts have progressively scaled back estimates of what they expect the IPO to raise to as little as 4 billion euros.

The sources close to the firm said on Thursday Deutsche Bahn was hoping to raise at least 4.5 billion euros.

Mehdorn said the company had received positive feedback from investors.

"Our equity story is being understood and people accept that we are a safe and solid value," he said.

Date created : 2008-10-09