Private Equity Gets Rare Support From Union on Schenker Sale
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Verdi, Germany’s most powerful labor union, is making the unusual move of backing a private equity firm’s bid for Deutsche Bahn’s planned 14-billion-euro ($15.5 billion) sale of its Schenker logistics arm.
After meeting with the two final suitors, Verdi estimated that 5,300 more jobs would be at risk if Deutsche Bahn were to sell the unit to Danish logistics company DSV A/S instead of a consortium around CVC Capital, according to documents seen by Bloomberg News and people familiar with the matter.
“If CVC were to take over, Schenker would continue to operate as one company. If DSV were to take over, DSV said the employees would be split between three companies,” Verdi said in the letter sent Aug. 29 to Deutsche Bahn’s supervisory board members. The union added that the supervisory board is strongly advised to work to preserve jobs.
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 logistics companies. Maersk ranks No. 28 on that list and No. 5 on the Top 50 list for global freight carriers.
DSV has valued Schenker at about 14 billion euros. (Carsten Snejbjerg/Bloomberg News)
The union’s preference for CVC is an example of private equity’s reputational shift in Germany, where they were long derided as locusts for buying targets, cutting costs and then moving on.
Representatives for Deutsche Bahn, CVC and DSV declined to comment on the sales process. Verdi couldn’t be immediately reached. Reuters reported the union’s letter earlier.
The move comes ahead of a Deutsche Bahn steering committee meeting late next week that could make a recommendation ahead of a potentially decisive supervisory board meeting on Sept. 18, people familiar with the matter said.
The privatization also comes at a tricky political time amid regional German elections in Saxony and Thuringia, in the former communist east, where the far-right Alternative for Germany could win the most votes in at least one of the nation’s 16 federal states for the first time. Such an outcome could intensify bickering within Chancellor Olaf Scholz’s deeply unpopular ruling coalition and spur calls for an early election in Europe’s biggest economy.
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Both bidders have valued Schenker at about 14 billion euros, though with different structures, the people said. Deutsche Bahn is pushing the suitors to sweeten their bids, which it currently views as unsatisfactory, the people said.
Under the current offers, Deutsche Bahn would get a higher upfront payment of the entire sum from DSV, people familiar with the matter said. DSV has also pledged to invest 1 billion euros over three to five years in the German infrastructure, terminals and offices of Schenker, one person said.
A portion of CVC’s purchase price hinges on Schenker meeting its own profit goals over the next few years, the people said. Under such a structure, also known as earn-out, the private equity firm has provided wiggle room for an earnings miss, as requested by Deutsche Bahn, some of the people said.
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CVC has provided a legal opinion that its€14-billion-euro offer is equally attractive for Deutsche Bahn, they said.
Verdi, in the letter seen by Bloomberg News, said that under DSV’s ownership “the headquarters of Schenker with around 2,300 employees are subject to layoff except 300 IT jobs.”
The union said its expectations are based on a conversation with DSV in July, in which the Danish logistics champion told them it “will shut them down.”
Written by Eyk Henning, Aaron Kirchfeld and Christian Wienberg.
