Chinese fund enters bidding for Autobahn group Tank & Rast
Among those bidding for the German autobahn service area chain Tank and Rast, which is jointly owned by British private equity group Terra Firma and Germany’s RREEF Infrastructure Funds, is the giant China Investment Corp.
The Chinese sovereign wealth fund has known ambitions to boost its direct investments in long-term overseas assets. If it succeeds in buying Tank & Rast, which could be valued at up to €3bn, it would mark the largest Chinese acquisition in Germany to date. Terra Firma has asked serious bidders to submit binding bids by the end of July.
The Tank & Rast chain has 390 autobahn service areas, 350 petrol stations and 50 hotels, making it the largest service provider of its type in Germany. The group employs 600 directly, including 300 in its Bonn headquarters, and over 12,000 through its numerous franchise partners, in generating more than €3bn in annual revenues.
The Guy Hands-led Terra Firma bought Tank & Rast in 2004 for €1.1bn from Lufthansa and two funds belonging to Apax and Allianz, six years after being privatised by the German government. In 2007 the private equity group attempted to sell the chain, and ended up selling just below 50% to Deutsche Bank’s alternative investments subsidiary RREEF.
The group was forced to take on hefty debt during the financial crisis, and ended up issuing very high-priced bonds to service its €2.1bn debt, including some which are committed to paying interest of up to 6.75%. The sticky nature of these commitments have made the consortium’s financial prospects much more difficult, so much so that an earlier-mooted IPO is no longer feasible, according to JP Morgan and Deutsche Bank, who are advising on the deal.
China Investment Corp. was formed in 2007 as a way for China to diversify its huge and burgeoning foreign-exchange holdings, and currently has about $220 billion in overseas assets. CIC's Chairman Ding Xuedong told media in an interview in March that the fund wants to take a more direct role in managing its overseas assets as its foreign holdings rise. CIC is thought to view Tank & Rast as a well-run and stable franchise in Europe's largest economy.
German companies are becoming increasing targets for Chinese looking to invest overseas. Investment fund Fosun has stakes in several German companies, ranging from banks to apparel retailers, while Chinese insurer Anbang was in talks to buy real estate lender Deutsche Pfandbriefbank this year. The key attraction for big Chinese investors such as insurance companies or pension funds in infrastructure projects is the possibility of diversifying away from their dependency on government bonds. CIC, for example, has only about 17% of fixed-income certificates in its holdings.
Thought to be still in the bidding process along with the Chinese sovereign fund are four different bidding groups - a consortium of insurer Allianz, Canadian infrastructure group Borealis, the Abu Dhabi Investment Authority, and MEAG, an investment subsidiary of Munich Re. Also in the frame are two groups assembled by Australian banking group Macquarie, along with the Singapore wealth fund GIC, and the Ontario Teachers Pension Fund.