3i announces net proceeds of €347m from Scandlines transaction

3i Group plc (“3i”) announces that 3i and funds managed by 3i (together Eurofund V) have sold their investment in Scandlines (“the Company”) for a total equity value of €1.7bn in a transaction with funds managed by First State Investments (“First State”) and Hermes Investment Management, two long-term infrastructure investors representing predominantly European pension funds.

The valuation of 3i’s 55% stake at 31 December 2017 was €744 million (£662 million); the transaction value is at an uplift of 27% to this value. 3i has separately agreed to reinvest into Scandlines at the same transaction value to become a 35% shareholder alongside First State (50.1%) and Hermes Investment Management (14.9%). Net cash proceeds to 3i following the reinvestment will be €347 million, and are expected to be received in the first quarter of FY2019.

Scandlines operates two short-distance, high-frequency ferry routes between Germany and Denmark which provide a critical transport link between Scandinavia and Germany and the rest of Continental Europe. The Company’s eight ferries provide efficient and reliable transportation services to the professional freight and private passenger markets, with more than 42,000 departures annually.

3i, and funds managed by 3i, initially acquired a 40% stake in Scandlines in 2007. They bought a further 10% stake from Deutsche Seerederei in 2010 and acquired the remaining 50% from Allianz Capital Partners in November 2013. Since 2007, 3i has supported Scandlines in its transformation from a state-owned business into a ‘best in class’ operator. To achieve this, Scandlines sold its Baltic and Helsingor-Helsingborg routes and focused the business on two routes linking Germany and Denmark. The transformation also involved investment in the Company to drive sales growth in its core vehicle-transportation business and transform its border shops. In addition, Scandlines invested in green technology and built two new ferries for the Rostock-Gedser route, providing increased capacity and frequency of crossings. Recently, the Company completed an €862 million infrastructure debt refinancing, which received an investment grade rating and substantially reduces its long-term cost of debt.

First State, Hermes Investment Management and 3i intend to support the further growth of Scandlines, including additional investment in green technology. As long-term investors, the three shareholders will continue to support management in the delivery of excellent customer service, safe operations and improving environmental efficiency.  

Peter Wirtz, Partner 3i Germany, added:

“During our investment period, Scandlines has been transformed from a state-owned business into an important infrastructure asset securing the central transport corridors between Germany and Denmark. Between 2012 and 2016, the Company has invested c. €365 million in green technology, new ferries and the upgrading of its port facilities to establish itself as a truly sustainable and reliable traffic machine.

Scandlines has been a fantastic investment for us and our re-investment, alongside First State and Hermes Investment Management, into the business reflects our confidence in its continued success. The Company is cash generative and has delivered strong capital growth and income since our investment. We continue to see a robust future for Scandlines and are delighted to continue to invest in such a well-run and strongly performing Company.” 

Marcus Ayre, Partner Infrastructure Investments, First State, added:

“We are pleased to have reached an agreement to partner with Hermes Investment Management and 3i in Scandlines and look forward to working closely with the Scandlines management and employees. 

As long-term infrastructure investors, investing primarily on behalf of European pension funds, we are especially attracted to the integral transport nature of Scandlines. By providing a high-frequency, environmentally friendly, quality service, Scandlines acts as a critical link between the economies of Continental Europe and Scandinavia.”

Peter Hofbauer, Head of Infrastructure at Hermes Investment Management, added:

“Scandlines operates an essential transportation link between Denmark and Germany, and represents an excellent European investment for our portfolio. Our investment in Scandlines is expected to deliver long term stable cash flows, through its focus on excellent customer service, environmental efficiency and safe operations. We are a long-term investor focussed on responsible investment and delivering sustainable and attractive risk adjusted returns for our clients. We look forward to working alongside Scandlines’ high-quality management team, our partners First State and 3i, and local stakeholders, to support Scandlines’ continued success.”

Søren Poulsgaard Jensen CEO, Scandlines said:

“I have enjoyed working with 3i to transform the company and develop its growth potential, and I am looking forward to working with the new consortium. Scandlines is a fantastic company with dedicated employees; we will all benefit from this long-term investment.”

Rothschild acted as financial advisers to 3i and Scandlines on the transaction, which is subject to customary approvals. Deutsche Bank and Macquarie Capital acted as financial advisers to First State and Hermes Investment Management.

-Ends-

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About 3i Group

3i is an investment company with two complementary businesses, Private Equity and Infrastructure, specialising in core investment markets in Northern Europe and North America. For further information, please visit: www.3i.com

3i’s Private Equity team provides investment solutions for growing companies, backing entrepreneurs and management teams of mid-market companies with an EV typically between €100m - €500m. We back international growth plans, providing access to our network and expertise to accelerate the growth of companies across the consumer, industrials and business and technology services industries.

About Scandlines  

Scandlines operates two short-distance ferry routes between Germany and Denmark with high frequency and large capacity. The company’s eight ferries provide efficient and reliable transportation services to the professional freight and private passenger markets, with more than 42,000 departures annually. With departures on the Puttgarden-Rødby route every 30 minutes, an average waiting time of 10 minutes and reliability of 95 percent, Scandlines is always open.

About First State Investments

First State Investments is a global asset management business with experience across a range of asset classes and specialist investment sectors, and manages approximately €142 billion of investments globally as at 31 December 2017. With more than twenty years’ experience in infrastructure investment, it is one of the longest established managers of infrastructure assets on behalf of institutional investors and currently manages in excess of €7 billion of equity invested across assets in the utility, transport and social infrastructure sectors in Australasia and Europe. First State Investments is owned by the Commonwealth Bank of Australia, Australia’s leading provider of integrated financial services.

About Hermes Investment Management

We are an asset manager with a difference. We believe that, while our primary purpose is helping beneficiaries retire better by providing world class active investment management and stewardship services, our role goes further. We believe we have a duty to deliver holistic returns – outcomes for our clients that go far beyond the financial and consider the impact our decisions have on society, the environment and the wider world.

Our goal is to help people invest better, retire better and create a better society for all.

We offer clients access to a broad range of specialist, high conviction investment teams with £33.0 billion* assets under management. In Hermes EOS, we have one of the industry’s leading engagement resource, advising on £336.1¹ billion of assets.

Hermes'' investment solutions include:

• Private markets – Infrastructure, private debt, private equity and real estate
• High active share equities - Asia, global emerging markets, Europe, US, global, and small and mid cap
• Credit - Absolute return, global high yield, multi strategy and global investment grade
• Multi asset - Multi asset inflation
• Stewardship – Active engagement, intelligent voting, sustainable development and advocacy

¹ Please note the total AUM figure includes £5.8bn of assets managed or under an advisory agreement by Hermes GPE LLP (“HGPE”), a joint venture between Hermes Fund Managers Limited ("HFM") and GPE Partner Limited. HGPE is an independent entity and not part of the Hermes group. £125.8m of total group AUM figure represents HFM mandates under advice. Source: Hermes as at 31 December 2017 with the exception of one portfolio totalling £9.9m valued as at 30 September 2017, and one portfolio totalling £2.7m valued as at 30 June 2017.

Regulatory information

This transaction involved a recommendation of 3i Investments plc, advised by 3i Germany.