EMEA: First State, Hermes agree to buy Scandlines majority stake

26 March 2018 - 12:00 am UTC

First State Investments and Hermes Investment Management have agreed to acquire a 65% stake in Scandlines from 3i Group and a fund managed by 3i for an enterprise value of EUR 2.56bn.

The sale prices comprises EUR 1.7bn of equity and EUR 862m of senior debt. It represents an EBITDA to enterprise value multiple of around 14 times based on the company’s 2016 earnings.

Infracapital last year sold its Red Funnel ferry service operating between Southampton and the Isle of Wight for an estimated GBP 265m, around 15 times annual EBITDA.

Among listed ferry companies, Irish Continental, which operates routes from Ireland to Britain and France and has a smaller container business, trades at around 13.5 times its EBITDA for 2017.

London-listed 3i Group will receive EUR 347m from the sale of its 20%. 3i Eurofund V, an unlisted fund managed by 3i Group, sold 45% in the transaction. 3i Group retains 35% in Scandlines.

This is Hermes’ first deal outside the UK, although it has had a strategy to invest throughout the OECD since it launched its first fund in 2011. The manager, which is buying a 14.9% stake, is currently fundraising for its GBP 1bn second fund. 

First State’s European Diversified Infrastructure Fund II will acquire a 50.1% stake in Scandlines, which operates two ferry routes, between Puttgarden in Germany and Rødby in Denmark, and between Rostock in Germany and Gedser in Denmark.

Scandlines, which reported revenues of EUR 470m and an EBITDA margin of 38%, sold a 50% stake in another ferry route to First State in 2015, with Stena Lines selling the other 50% to the fund.

The two ferry companies already have a commercial partnership which will continue on an arms-length basis, a spokesperson for First State said. There is no plan to merge the two given the difference in the shareholding structures.

Inframation understands First State and Hermes will use holding company level debt to support their acquisition, which is due to close next quarter.

Inframation previously reported that four bidders were preparing to make offers for the Danish-German ferry company on 23 March.

Scandlines will soon face competition from the Fehmarnbelt Fixed Link tunnel. The tunnel, planned by the Danish government, will link Fehmarn in Germany and Lolland in Denmark, offering faster journey times but likely a high toll. 

The tunnel project was originally due to open in 2018 but work has not yet begun as the project is still seeking planning permission in Germany. Construction will take around 8.5 years.

The earliest estimates put the completion in 2028, but the long planning process could push this beyond 2032.

Between 2012 and 2016, Scandlines has invested EUR 365m in green technology, new ferries and the upgrading of its port facilities.

3i acquired a 40% stake in Scandlines in 2007, then a further 10% stake from Deutsche Seerederei in 2010. It bought the remaining 50% from Allianz Capital Partners in November 2013. 

3i was advised by Rothschild. First State and Hermes were advised by Deutsche Bank and Macquarie Capital (financial), Baker McKenzie and Bruun & Hjejle (legal), Leigh Fisher (technical), and Oliver Wyman (commercial).


First State