UPDATE 1-UK govt to appoint UBS on possible Eurostar stake sale - sources

Wed Mar 5, 2014 1:35pm EST

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By Sophie Sassard and Anjuli Davies

LONDON, March 5 (Reuters) - The British government is close to appointing investment bank UBS to advise on the possible sale of its 40 percent stake in Eurostar, the fast speed train that links Britain to Europe, four sources told Reuters on Wednesday.

The stake could fetch around 300 million pounds ($500 million) and may attract pension funds, infrastructure funds and sovereign wealth funds, according to the sources, who are familiar with the situation.

In December, Britain identified its share of the Eurostar cross-channel rail link as one of a number of government assets which could be sold off by 2020 to raise money for the public purse. Bankers had then been invited to pitch and were expecting the government to appoint a financial adviser in the first quarter of this year.

"The Government has never intended to retain its 40% stake in Eurostar. It is seeking to appoint advisers to support our assessment as to whether a sale, in the current climate, of our share in Eurostar would deliver value for money for the UK taxpayer.", said a spokesperson for the Department for Transport (DfT).

Alongside the British government, French state-owned rail operator SNCF holds 55 percent of the company and the Belgian government owns the remaining 5 percent.

A spokesperson for SNCF said that the French company will monitor the British government's intention regarding its 40 percent in Eurostar as soon as it becomes public. The person added that SNCF will remain Eurostar's main industrial partner with 55 percent of the company and also has a pre-emption right on any change in ownership.

An official announcement on the appointment is expected within the next few days, one of the sources said.

Several sector bankers said they didn't expect SNCF to buy from the UK government the remaining stake in Eurostar.

UBS declined to comment.

The sale is part of the British government's plans to privatise 20 billion-pounds of state assets in the next six years and to boost private-sector infrastructure investment.

Established in 1994, the high speed rail service transported more than 10 million passengers in 2013 for the first time in its history, with revenues rising 7 percent year-on-year to 857 million pounds, it said on Wednesday.

Infrastructure projects attract insurers, pension funds and infrastructure funds because they offer the prospect of an inflation-linked return, often with a government guarantee, that helps them meet life insurance and pension liabilities.

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