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Pension funds play key role in Eurostar buy out

05 March 2015

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A group of British pension funds have secured 10 per cent of rail company Eurostar as the UK government sold off its share of the company for GBP 585.1m.

The agreement, which will boost Chancellor George Osborne's effort to promote British pension funds for British Infrastructure, is part of a privatisation push aimed at reducing Britain's vast national debt.

He said it was a fantastic deal for UK taxpayers that exceeded expectations.

"Investing in the best quality infrastructure for Britain, getting the best value for money for the taxpayer and tackling our country's debts are key parts of our long term economic plan, and in today's agreement, we are delivering on all three" he said.

The funds involved will have a collective 10 per cent stake and include the UK pension fund for bank Santander, which is taking a third, the BT Pension Scheme, also with a third, and a number of UK corporate and local-authority pension funds that largely make up the remainder.

Britain currently owns 40 per cent share of the company, French owned state rail operator SNCF has 55 per cent, and Belgian SNCB has five per cent.

After the deal is completed, the UK Pension Funds will have 10 per cent, SNCF will keep its 55 per cent, SNCB 5 per cent, and the Canadian pension fund giant Caisse de Dépôt et Placement du Québec will have 30 per cent.

Their investment is being managed by Hermes, the fund manager owned by the BT Pension Scheme and Hermes said it expected the sale to be completed by the end of June.

Hamish DeRun, a partner at Hermes Investment Management, said this was the fund's first direct transportation asset, falling under its 'value added' strategy, giving investors exposure to GDP growth-linked assets.

"Teaming up with CDPQ made sense because they bring a lot of experience in transportation assets and also in working with SNCF," he said.

Antony Barker, head of pensions at Santander, said: "We're an investor in the Hermes Fund but have also supported the bid via our segregated account programme such that we are now holding just over 4% of the company.

"It's a good deal - what the coverage doesn't pick up is it comes with a brand new set of rolling stock about to be delivered and a franchise that extends through France to the ski resorts and south coast – and coupled with redevelopment of Kings Cross, we can only see demand increasing."

First published 05.03.2015

Lindsay.sharman@wilmingtonplc.co.uk