French state railway SNCF about to sell subsidiary for over 3 billion euros -source

April 23 (Reuters) - France’s state-owned railway company SNCF has entered into talks about selling its railcar subsidiary Ermewa for more than 3 billion euros ($3.62 billion), according to a source familiar with the matter.

Following a competitive auction process, the group’s board of directors approved plans to start exclusive negotiations with a consortium consisting of Caisse de dépôt et placement du Québec (CDPQ) and a fund managed by DWS Group (DWS) for the sale of Ermewa.

The Paris-based subsidiary - which provides industrial rail cars and tank container leasing services - posted core earnings of 271 million euros on revenues of 489 million euros in 2020.

Although it has not disclosed financial details, a source familiar with the situation said the SNCF Group hoped to earn around 3.3 billion euros from the transaction, which will need the go-ahead of competition authorities.

Proceeds from the sale should help replenish the state-owned firm’s treasury, hit badly by the drop in traffic due to the coronavirus pandemic.

“This operation would (...) accelerate the group’s debt reduction and pursue the objective of maintaining its financial trajectory, while backing Ermewa with long-term partners,” SNCF Group chief executive Jean-Pierre Farandou said in a statement, which did not mention how much SNCF hoped to raise from the sale.

The SNCF, whose debt reached 38 billion euros last year, booked a 3 billion euros net loss on turnover of 30 billion euros in 2020. ($1 = 0.8284 euros) (Reporting by Gwénaëlle Barzic in Paris ; Writing by Juliette Portala in Gdansk ; Editing by GV De Clercq and Louise Heavens)