(Bloomberg) -- CVC Capital Partners Plc signaled it’s willing to increase its €14 billion ($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 Tuesday. 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 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 and an enterprise value of €14.3 billion 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.
CVC’s move marks a last-ditch effort to sway Deutsche Bahn from going through with the sale to DSV, which won the bidding by making an all-cash bid compared with the buyout firm’s structured offer that included equity, an earn-out clause, a vendor loan and re-investment from Deutsche Bahn.
Shares of DSV fell as much as 5.8% in Copenhagen, the biggest intraday decline since October 2023, following the Bloomberg News report. The stock closed down about 1.6%. Shareholders last week cheered DSV’s deal for DB Schenker, sending the stock up by 10% after Bloomberg News reported the Danish group was in advanced talks for the assets.
In response to CVC’s latest letter, Deutsche Bahn said the sales process was conducted in accordance with European Union law in a transparent, open and discrimination-free manner. After thorough analysis and clearly communicated parameters including an Aug. 22 deadline, the “result was clear” that DSV’s successful offer was the best economically, Deutsche Bahn said in an emailed statement.
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. A representative for CVC declined to comment.
CVC’s Efforts
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.
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 eventually at least double its money if it reinvested €1 billion 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. The offer also included a vendor loan, which is typically a loan provided by the seller to help the bidder finance the deal.
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.
Deutsche Bahn thinks otherwise, saying that even after all of CVC’s modifications, the DSV bid remains superior, according to Wednesday’s statement.
--With assistance from Sara Sjolin.
(Updates with further details on the bids from fifth paragraph)
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