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Business

German Government Agrees Private Purchases of Deutsche Bahn

Chancellor Angela Merkel's cabinet has approved plans to let private investors take over just under one quarter of the operations of Deutsche Bahn, one of the world's biggest rail transport groups.

The Deutsche Bahn headquarters in Berlin

The German cabinet will allow private investors to buy into Deutsche Bahn

The government intends to proceed with the part-privatization of the national rail company, Deutsche Bahn [DB] in November or December. DB owns rail companies outside Germany and is also a major road transport operator within Germany.

The heads of the two parties in Merkel's coalition agreed Monday on selling off a stake in the passenger and freight services, while retaining the railtracks, stations, power generation and signaling in state hands.

Estimates on the value of the 24.9-per-cent stake in passenger and freight services run to around 6 billion euros [$9.5 billion].

The issue provoked months of debate within the broad coalition government, comprising Merkel's conservative Christian CDU/CSU bloc and its traditional rival, the Social Democrats [SPD].

The SPD conceded ground in the debate, backing away from a proposal to sell the DB stake as "people's shares."

Instead, the offering is expected to go to big institutions, with some shares being sold to rail employees.

Conservatives aim to double the stake

Chancellor Merkel with Deutsche Bahn CEO Hartmut Mehdorn

Chancellor Merkel with Deutsche Bahn CEO Hartmut Mehdorn

The CDU/CSU hopes to later double the stake sold off to 49.9 percent, but still intends to retain the 34,000-kilometre track network in state hands.

DB, which has 237,000 employees, has reached a pre-privatization accord with unions ruling out layoffs for the next 15 years.

Berlin says two thirds of the money raised in the flotation will be channeled back into modernizing the tracks, shabby stations and building sound-barriers to cut acoustic pollution next to tracks.

Details are to be set out in a future contract with DB.

Part of the remaining one third will end up in the general federal budget or be used to increase DB's general funds.

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