Apr 25, 2008, 2:08 GMT
Berlin - Germany's political leaders are to try to hammer out an agreement Monday on a controversial plan to sell shares in the nation's railway company, Deutsche Bahn AG, with the sale shaping up to be one of Europe's biggest stock market listings this year.
Despite a plunge in the number of companies making their share market debut as a result of the global financial crisis, Deutsche Bahn chief Hartmut Medhorn is hopeful that he can launch the partial sell off of Europe's largest rail company later this year.
'We have to grab the chance,' said Medhorn releasing Deutsche Bahn's results last month with analysts expecting the privatization to generate about six billion euros (9.5 billion dollars).
The German daily Financial Times Deutschland reported last week that Berlin-based Deutsche Bahn has already begun drawing up a prospectus for the company's possible initial public offering as well as creating facilities for potential investors to examine its books.
However, financial analysts are rather sceptical about the sale especially as only a relatively small parcel of shares are likely to go up for sale.
Deutsche Bahn shares are 'still not attractive' for investors Franz-Josef Leven from the German Share Institute (DAI) told German radio Deutschlandfunk.
The push to privatize Deutsche Bahn cleared a major hurdle this week when the Social Democrats (SPD) formally signed off on a compromise selloff deal, paving the way to an agreement on partially privatizing what is one of the world's largest transport companies.
Under the plan drawn up by the SPD, the junior members of Merkel's grand coalition, private investors will be able to buy up to 24.9 per cent of Deutsche Bahn's passenger and logistics operations.
But while this fell short of the 49.9 per cent that Merkel and leaders of her conservative bloc had been arguing for, senior members of her party have indicated that 24.9 per cent could end up being the first tranche of shares sold off in Deutsche Bahn.
However, after coming under fire from business and economists about her government's failure to press on with economic reform, Merkel needs the rail sell off to demonstrate her commitment to a makeover of Europe's biggest economy.
In reaching a deal, the SPD has also backed off a proposal that the Deutsche Bahn stock should be sold as part of a people's share action, which could open the door for the bulk of the IPO finding its way into the hands of big institutions.
'Something is better than nothing,' said Werner Schnappauf, the chief of the German Federation of Industry (BDI) after the SPD leadership moved to override deep opposition within its influential leftwing faction to privatizing Deutsche Bahn and head off calls for a special party conference to vote on the issue.
But Germany's private investors' association (DSW) has sharply criticized the privatization plan saying that 24.9 per cent of the company was too small to be put up for sale.
'Who spends the money will also want to have a say in the company,' DSW chief Carsten Heise told the Deutsche Presse-Agentur dpa.
Under the SPD privatization plan, the government would retain 75.1 per cent of Deutsche Bahn's passenger and freight operations, which includes about 140,000 employees.
What is more, Berlin is to retain a 100-per-cent control of Deutsche Bahn's railway stations as well as its 34,000 kilometres of track network and energy supplier operations.
With the sale of shares in Germany's giant telecoms group Deutsche Telekom AG having taken stockholders on a rollercoaster ride since they were listed on the stock market more than a decade ago, Germans have reacted lukewarmly to the planned sell Deutsche Bahn sell off.
A poll published last week by German state television ZDF found that 58 per cent of people were opposed to the sell off the Bahn's passenger and freight operations.
Almost half said they thought rail passengers would be disadvantaged by privatization with Deutsche Bahn.
The ambitious partial selling off of Deutsche Bahn would be the culmination of a 14-year battle to turn around the financial fortunes of the once loss-making rail operator.
But the rail privatization push has followed a rocky path with former Chancellor Gerhard Schroeder's government having failed in its plan announced in 2004 to sell off shares in the rail company between 2006 and 2008.
The build-up to this month's scheduled decision on the sale of shares in Deutsche Bahn came after the group announced that profit that last year rose 2.1 per cent to 1.72 billion euros (2.72 billion dollars).
Deutsche Bahn forecast a rise in sales of about 5 per cent in 2008 after saying 2007 sales jumped by 4.2 per cent to 31.3 billion euros.
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