Railcar Firm VTG Rejects Morgan Stanley Unit's $1.8 Billion Bid

(Bloomberg) -- VTG AG’s management rebuffed a 1.53 billion euro ($1.79 billion) takeover offer from Morgan Stanley’s infrastructure arm and said the approach undervalued the German wagon-hire and rail-logistics company.

“The offer does not reflect the fundamental value of VTG Aktiengesellschaft considering its future potential,” the Hamburg-based company said in an emailed statement Monday. Still, VTG Chief Executive Officer Heiko Fischer said he’s open to constructive discussions.

The infrastructure firm, which already owns 29 percent of VTG, is offering 53 euros a share in cash for the rest, Morgan Stanley said in a statement Monday, confirming a Bloomberg News report from earlier in the day. As part of the proposal, Morgan Stanley has received a commitment from Kuehne Holding AG to sell its 20 percent stake.

VTG shares rose 12 percent to close at 54 euros in Frankfurt trading, surpassing the bid price. That’s the biggest gain since August 2011.

Morgan Stanley’s infrastructure arm in 2016 acquired the stake in VTG, which has about 80,000 railcars, the biggest privately owned fleet in Europe, according to its website. Sales totaled more than 1 billion euros and earnings before interest and tax 155 million euros in 2017. The company’s wagon hire, manufacturing and maintenance services are used by the chemicals, petroleum and automotive industries.

Exciting Outlook

“We’re excited about the outlook for the private railcar leasing industry,” said Markus Hottenrott, chief investment offer at Morgan Stanley Infrastructure Partners, citing growth potential in eastern Europe as well as expansion in digitalization and logistics services. “There’s also an opportunity for private rolling-stock companies as government-owned railways invest less and less.”

While Morgan Stanley is content with the 49 percent stake it will hold after Kuehne sells, the company is also open to taking VTG private if other shareholders tender their shares, Hottenrott said, stressing that a long-term exit could be via a sale or listing. There are no plans to change the company’s management, he said.

Morgan Stanley Infrastructure Partners, which has about $5 billion in assets under management, has experience in the rolling-stock sector with its previous ownership in Eversholt, one of three companies created in 1994 when Britain’s state-run railway was privatized.

VTG traces its roots to a state-owned enterprise created in 1951, and the company was listed on the Frankfurt stock exchange in 2007, according to its website. The company’s previous owners have included investor Wilbur Ross, who is currently U.S. Commerce Secretary, as well as tour operator TUI AG, which sold the company in 2005.


Ross and now Morgan Stanley aren’t the only high-profile investors to bet on railways. Warren Buffett’s Berkshire Hathaway Inc. completed its purchase of Fort Worth, Texas-based BNSF Railway Co. in 2010, a transaction valued at about $34 billion that he described as a bet on the U.S. economy because of railroads’ vital role in moving freight.

“We expect this to be a good investment, but not a Warren Buffett-like investment,” Hottenrott said when asked if there are any parallels.

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