German rail company snubs Morgan Stanley’s takeover bid

At €53 per share, VTG considered the US fund manager’s bid ‘not appropriate' representing a premium of only 4% on the volume-weighted three­-month average share price.

Morgan Stanley Infrastructure has seen a takeover offer for Germany-headquartered wagon hire and rail logistics company VTG rejected because it was deemed too low.

The group made an offer worth €53 per share, valuing the company at about €1.5 billion. However, VTG, which last year had an EBITDA of €343 million, said “the offer does not reflect the fundamental value” of the group.

VTG said the bid does not take into account the future prospects of the company following its soon-to-be-completed deal for CIT Rail Holdings, as well as a premium for the market price in the last few months.

“We are open to constructive dialogue with the bidder and, once we have received the offer document, we will examine in detail whether the offer is in the interests of the company, our employees and shareholders,” said Heiko Fischer, chairman of the VTG board. “However, in our opinion, the announced offer price of €53 does not reflect the potential of the company and, from today’s point of view, is therefore not appropriate.”

The offer was defended by analysts at Commerzbank, which said that “the offer looks reasonable” and comes at an 18 percent premium to its target price.

“Against the backdrop of improving regulation at least in Germany and environmental challenges with respect to road transport, we would not be surprised if some investors requested a higher price and the initial reaction to the offer may be a stock price above €53,” it stated.

VTG added that Morgan Stanley’s offer contained a condition for it to have no relations with companies facing US sanctions, thought to be related to VTG’s subsidiary in Russia. It explained it regularly reviews such relationships but has no plans to cut these ties.

Morgan Stanley insisted it was impressed by the success of VTG to date and believes in the future of the company.

“We have friendly intentions and believe that with our global expertise in infrastructure, we are an excellent partner to support the future growth of VTG AG through constructive collaboration with all stakeholders,” said Markus Hottenrott, chief investment officer of Morgan Stanley Infrastructure Partners.

Morgan Stanley already holds a 29 percent share in the company via its €3.6 billion North Haven Infrastructure Partners II fund following a deal in October 2016. It had agreed prior to the offer to acquire a further 20 percent from Switzerland-based Kühne Holding.

VTG has a presence in Europe, North America, Russia and Asia and has a fleet of around 83,000 rail freight cars and wagons. It was formerly owned by WL Ross, the private equity group chaired by the now US Secretary of Commerce Wilbur Ross.