[R-G] 'A Deathblow to Privatization': Planned IPO of Deutsche Bahn Put on Hold

[Yoshie Furuhashi]

<http://www.spiegel.de/international/0,1518,583423,00.html>
'A Deathblow to Privatization'

One of the German government's most ambitious and arduously negotiated
projects fell victim to the financial crisis on Thursday. The planned
IPO of Deutsche Bahn have been put on hold. German commentators have
their doubts if it will ever get back on track.

With the global financial crisis showing no sign of abating, German
crisis managers find themselves both adjusting future budgetary
expectations and reconsidering earlier economic decisions. Among the
objects of second-guessing are plans to privatize Deutsche Bahn,
Germany's national railway company. The initial public offering
process had been scheduled to begin on Monday and the company,
expecting to take in upwards of €4 billion, had already been courting
international investors for months.

Thursday, government officials announced that the privatization would
be delayed until further notice. "We are not going to put the assets
on the capital markets at the wrong time," Finance Minister Peer
Steinbrück said.

The postponement is a bitter pill to swallow for Germany's ruling
"Grand Coalition" between Christian Democrats and Social Democrats.
The privatization plans -- which called for the company's passenger,
freight and logistic divisions to be spun off into a holding company,
24.9 percent of which was to be privatized -- were the product of
months of arduous negotiations between the coalition partners. It was
also among the government's few headlining achievements during its
three years in power.

Politicians insist that they reckon only with a delay, not a
cancellation of Deutsche Bahn's privatization. As Angela Merkel told
reporters Thursday, "I assume that there will eventually be a business
environment in which the privatization can take place." But, with
politicians openly discussing greater intervention in the economy and
murmuring of further bank takeovers, Germany's newspaper commentators
are skeptical that the Deutsche Bahn plan will ever get back on track.

The center-left Süddeutsche Zeitung writes:

"The worst case scenario for Deutsche Bahn is that nothing changes.
Rail remains a state-owned company and it remains a giant with
monoplistic control over trains and track networks. How likely the
worst case is, though, is about as easy to predict as the health of
the stock market at the end of November. The fact is that the
privitization of German rail has lost all momentum...."

"Meanwhile, difficulties are mounting. German rail may be able to
credibly promise that rail doesn't need to be overly concerned about
the economic problems. After all, travellers will continue to travel
and goods will still have to be transported through the country. But
one business segment, carefully built up by the head of Deutsche Bahn
Hartmut Mehdorn, is in trouble: global freight. If the global economy
slows down, there won't be as much to transport. When the numbers will
be as auspicious for a German rail IPO as they were this year is a
question nobody can answer."

The business daily Handelsblatt writes:

The fact is, the already botched, partial privatization of the
Deutsche Bahn received on Thursday ... it's death blow. And that's a
good thing."

"The calculation behind the political pressure for partial
privatization is clear: the IPO is a prestige project for Germany's
governing coalition. But that coalition reaches the end of its road in
the elections next fall. The coalition can see that there will likely
be a larger opposition from the left, which is hardly supports rail
privatization. The IPO, then, would have to take place before next
autumn's elections."

"That, though, isn't likely and, seen politically, the chances that
the light will ever again be green are sinking. At the moment, one
bank after another across the globe is being partially nationalized. A
partial privatization of German rail hardly fits."

"Finally, there are the economic forecasts, that predict anything but
rosy economic times in the coming months. It is hard to imagine stock
markets making a quick recovery. The value of the company on the stock
market will continue to sink. Every day that the stock market drops is
another argument for not selling the German rail system cheaply -- and
with that, the light will remain red."

The business daily Financial Times Deutschland writes:

"Among the people, the entry to the market has few friends, and
skepticism of the market will only increase. It won't be long until
the representatives of the governing parties succumb to the temptation
to question the privatization plans. Then we'll be facing a bizarre
alliance of panicking markets and moralizing admonishers. That would
be a big mistake."

"If the government initiates another fundamental debate about the
privatization of Deutsche Bahn, many of the interested investors would
be permanently turned off. It would be too clear a signal that the
company is a plaything of political interests."

"If Berlin doesn't manage [to realize the privatization plans] years
of preparation will have gone to waste. And that won't have helped
anyone -- neither the head of Deutsch Bahn, nor the passengers of the
railway."

The left-of-center Beliner Zeitung writes:

"It's understandable if the latest rejection causes stomach problems
for the head of Deutsche Bahn. Because nobody knows whether the
markets will have calmed down enough in the next few weeks to make
another go at privatization. There's much to suggest that that won't
be the case."

"A large majority of the population has always rejected the idea of
going public. Many of Deutsche Bahn's employees have also always
preferred to remain under control of the state. Their desire is
understandable. They fear that unserious investors will have a say at
the company. And in the past few days, these fears have likely
deepened and spread even further. The recent turbulence has caused
enormous damage to the public's trust of the free market. Certainly it
calls into question the point of railway privatization. It is indeed a
paradox that, at a time when banks around the world are getting
nationalized, Deutsche Bahn wants to enter the stock market."

-- Cameron Abadi; 3:15 p.m. CET