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La Caisse, Hermes to pay £585m for Eurostar stake

The transaction, which will see the Canadian pension and the UK asset manager own a joint 40% of the rail operator, is part of the UK’s government efforts to sell £20bn of assets by 2020.

La Caisse de dépôt et placement du Québec (La Caisse) and Hermes Infrastructure (Hermes), the infrastructure investment unit of Hermes Investment Management, have agreed to acquire a 40 percent stake in Eurostar International from the UK government.

The Canadian pension and the London-based asset manager are set to pay £585.1 million (€806.7 million; $893.1 million) for their share in the rail operator. 

Société Nationale des Chemins de Fer Français (SNCF) and Société Nationale des Chemins de Fer Belges (SNCB), Eurostar’s other existing shareholders with 55 percent and 5 percent of the company respectively, now have the option to acquire the UK Government’s 40 percent shareholding for a 15 percent premium to the agreed price.

Closing of the all-equity transaction, which remains conditional on SNCF and SNCB not exercising their pre-emption right, is expected to happen during the second quarter of 2015. The UK government will pocket an additional £172 million through redeeming its preference share in the company upon completion of the sale.

Based in London, Eurostar operates high-speed rail services, primarily serving the London-Paris and the London-Brussels route through the Channel Tunnel. Its trains, which started circulating in 1994, carried more than 10.4 million passengers last year.

During an interview with Infrastructure Investor, Macky Tall, senior vice-president for infrastructure at La Caisse, said the institution intended to hold a stake in what he saw as a “unique, very high-quality asset” for at least 10 years. He added that the effort would now focus on improving the quality of Eurostar services, modernising its fleet and opening new routes. 

Tall expected the institution's relationship its future “strategic industrial partners”, SNCF and SNCB, to be a fruitful one. La Caisse has been a shareholder alongside SNCF in Keolis, France's largest private sector transport group, since 2007. 

The sale is part of the UK government’s efforts to reduce debt by privatising £20 billion of assets in the years to 2020. A statement by the country’s Treasury states that the agreed price exceeds expectations it originally formed upon inviting bids in October last year.