DENMARK/GERMANY. The owner of Scandlines has put the ferry group and duty free retailer on the block – with a valuation that could be in the region of £600 million ($800 million) – a reliable source close to the matter has confirmed to The Moodie Davitt Report.

The news first broke in UK newspaper The Sunday Times yesterday.

UK-based private equity and infrastructure investment group, 3i Group, is officially not commenting on the move. However, The Moodie Report understands reliably that investment bank Rothschild has been retained to explore the sale of Scandlines in its entirety.

This would include the company’s portside duty free and travel retail businesses – so called ‘BorderShops’ – at Puttgarden and Rostock.

The company said that its three store locations here attract over 1.5 million customers annually who “look to benefit from low prices on a huge range of beer, soft drinks, confectionery, wine, and fine spirits”.

Ferry and land border shops generated around €137 million in sales in 2016

Travel retail contributes €137 million (29%) of revenue

In 2016, Scandlines generated €470 million in revenue (US$552.5 million), up +2% year-on-year. 3i recognised the company as a “strongly performing asset” last year.

BorderShops accounted for 29%, or €137 million, similar to 2016. However, Bordershops’ contribution to EBITDA was just 9% (€16 million) – which makes it a segment that could potentially be independently spun off.

Could the BorderShops operation be spun off separately?

Scandlines has modernised its Bordershops, which led to more transactions in 2016. The flat revenues suggest a spending squeeze in a difficult year. The company is also expanding its Smile loyalty programme, which has almost 400,000 members.

While the company describes its core business as providing efficient passenger and freight transport, it stresses its duty free and travel retail credentials by adding: “The main focus for all activities in Scandlines is to create value for our customers on board the ferries as well as in the shops of Scandlines.”

The company operates routes between Denmark, Germany and Sweden, with three short ferry routes marketed with high capacity and frequency. In 2016, Scandlines had over 90,000 departures on 12 ferries, transporting 15 million passengers, 3.2 million cars, and one million freight units on the routes Puttgarden-Rødby, Rostock-Gedser and Helsingør-Helsingborg.

Tunnel vision a challenge

Potential buyers will be evaluating the Fehmarn Belt fixed linka tunnel planned to connect Denmark and Germany, and a direct competitor to Scandlines’ Puttgarden-Rødby route. The most recent public statements made by the Danish government indicate that the earliest opening of the link would be 2028.

Scandlines commented: “The German authorities continue the formal plan approval process for the establishment of a fixed link. We will ensure that the foundation for a decision regarding the establishment of a fixed link is as accurate as possible. This implies a positive and factual dialogue with decision makers in Germany, Denmark and the EU.”

Scandferries Holding ApS is the parent of Scandferries ApS. The ultimate parent is Scandferries Holding UK, whose primary shareholders are 3i Group plc and funds managed by 3i.