UK Plans to Sell Its 40% Stake in Eurostar Before Rail Company’s Biggest Expansion

Britain plans to sell its 40 percent stake in Channel Tunnel express train operator Eurostar Group Ltd. as it seeks to improve transport links and raise billions of pounds from asset disposals after paring state spending.

Talks about a sale are taking place with other investors in Eurostar, which is majority owned by France, the Department for Transport said after the plan was revealed by the Treasury under a 375 billion-pound ($510 billion) infrastructure program.

Eurostar, whose core routes link London with Paris and Brussels, carried 9.9 million passengers last year and doubled its operating profit to 52.3 million pounds. The company is seeking growth through the addition of further European destinations, while facing competition from Deutsche Bahn AG, Europe’s biggest rail operator, which plans London services.

“It is for the U.K. government to decide on its plan for its shareholding in Eurostar,” the train company said today in a statement. “Our focus is on looking after our customers, expanding to new destinations and growing the business.”

The disposal is included in a refreshed version of the U.K. National Infrastructure Plan, which details public and private- sector projects to 2030 and beyond, the Treasury said.

Insurance companies including Prudential Plc and Aviva Plc will invest 25 billion pounds as part of that plan, which covers projects from energy to communications. No decision has been taken on the timing of the Eurostar sale, which is being pursued after the doubling of a target for the sale of state corporate and financial assets to 20 billion pounds, a DfT official said.

Amsterdam Route

The U.K. is the No. 2 shareholder in Eurostar, with the French government holding 55 percent via state rail company SNCF. Belgium railway SNCB owns the rest.

The disposal plan comes as Eurostar gears up for its biggest expansion in years, with new e320 trains ordered from Siemens AG due to link London with Amsterdam from December 2016, with stops in Antwerp, Rotterdam and Schiphol airport.

At the same time it faces new competition as Deutsche Bahn plans services from Germany to London via the Channel Tunnel from 2016 after a three-year safety study, Groupe Eurotunnel SA, which runs the 30-mile subsea link, said in June.

Eurostar is also seeking more transfer customers as the addition of direct trains to Lyon, Avignon and Aix-en-Provence showcases options for using its routes in long-distance trips.

The company aims to expand beyond tunnel services through a joint bid with the Keolis unit of SNCF, or Societe Nationale des Chemins de Fer Francais, for the right to operate the U.K.’s East Coast link between London and Edinburgh.

The U.K. move to exit the Eurostar stake is part of a wider government drive to raise cash as it pares state spending and seeks to shift more companies out of public hands ownership.

An initial public offering of 360-year-old postal service Royal Mail Plc raised 1.7 billion pounds.

Editors: Christopher Jasper and Benedikt Kammel.

To contact the reporter on this story: Robert Wall in London at [email protected]. To contact the editor responsible for this story: Benedikt Kammel at [email protected].