CVC Willing to Bump DB Schenker Bid After Losing to DSV
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CVC Capital Partners Plc signaled it’s willing to increase its 14 billion-euro ($15.6 billion) offer for Deutsche Bahn AG’s logistics unit after losing the bidding to Danish company DSV A/S.
The buyout firm said it’s open to discussing a potential boost to the equity value of its bid in a letter to Deutsche Bahn’s supervisory and management board dated Sept. 17. The letter lays out CVC’s arguments on why it views its existing offer for DB Schenker as “superior” to DSV’s, and calls on Deutsche Bahn to conduct “a process of equal treatment and transparency which allows the best offer to win.”
“If Deutsche Bahn was of the view that there were any residual uncertainties as to how the two offers compare, we would be prepared to discuss an increase of the equity value of our offer to fully remove any such concerns,” CVC said in the letter, a copy of which was obtained by Bloomberg News.
DSV A/S (North America) ranks No. 10 on the Transport Topics Top 100 list of the largest logistics companies in North America. It ranks No. 14 on the TT Top 50 list of the largest global freight carriers.
DB Schenker ranks No. 25 on the TT Top 100 list of the largest logistics companies in North America. Deutsche Bahn ranks No. 15 on the global freight carriers TT50.
DSV announced Sept. 13 it had signed an agreement to acquire DB Schenker in an all-cash transaction for an equity value of 11.3 billion euros and enterprise value of 14.3 billion euros after Deutsche Bahn’s management board backed the Danish bid. However, Deutsche Bahn’s supervisory board still needs to approve the agreement at a Sept. 27 meeting, according to people with knowledge of the matter.
A representative for CVC declined to comment. A DSV spokesperson declined to comment beyond a previous statement that the deal is subject to approvals by Deutsche Bahn’s board and the German Federal Ministry for Digital and Transport.
The sales process of DB Schenker was conducted by owner Deutsche Bahn in alignment with EU law in a transparent, open and discrimination-free manner, according to a statement from the rail operator on Sept. 18. After thorough analysis and clearly communicated parameters, the successful offer was the best economically, Deutsche Bahn said.
One of the key themes in the talks was the preservation of jobs in Germany. Verdi, the country’s most powerful labor union, last month made the unusual move of backing CVC’s bid, saying the private equity firm might fire fewer people after a takeover. DSV, in response, made additional job and investment pledges, Bloomberg News has reported.
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As part of CVC’s efforts to win over Deutsche Bahn, the buyout firm in early September offered to guarantee that the rail operator would at least double its money if it reinvested 1 billion euros to keep a stake of up to 24.9% in DB Schenker. The private equity firm’s bid also included an earn-out clause, which means the purchase price hinges on DB Schenker meeting its own profit goals over the next few years.
Despite CVC’s proposals to sweeten its bid, Deutsche Bahn’s management board opted for DSV’s offer because it preferred the upfront cash. This week’s letter makes clear that the buyout firm believes its bid was not given fair consideration and CVC is not giving up yet.
“We strongly believe that our offer is superior to the DSV offer which is why we should have been awarded the contract relating to the acquisition of Schenker,” the letter said.
