CKI set to bid for Eversholt Rail

Cheung Kong Infrastructure is set to bid for UK rolling stock company Eversholt Rail in a sale that is expected to fetch more than $1 billion, according to a source familiar with the matter.

The sale process is in its preliminary stages and Cheung Kong Infrastructure is expected to face competition from global infrastructure funds and pension funds also seeking stable, yielding assets.

Royal Bank of Canada is advising Cheung Kong Infrastructure.

Eversholt Rail, which owns UK passenger and freight rolling stock, has a one-third share of the UK passenger rolling stock market. It was one of three rolling stock companies formed when British Rail was privatised.

Eversholt Rail was in the hands of HSBC from 1997 to 2010 and is now owned by the Eversholt Investment Group, a consortium consisting of STAR Capital Partners, 3i Infrastructure plc and Morgan Stanley Infrastructure Partners. The consortium acquired it in 2010, in a deal that valued Eversholt's gross assets at about £2.1 billion.

It is not the first time that Cheung Kong Infrastructure has set its sights on a rolling stock company. Earlier this year, Chueng Kong Infrastructure was among the frontrunners for UK rolling stock leasing company Porterbrook Rail Finance but it lost out to a group of funds including Alberta Investment Management Corporation, Allianz Capital Partners and Hastings Funds Management.

Li Ka-shing-controlled companies such as Cheung Kong Infrastructure have been sniffing around for overseas assets as Hong Kong’s richest man reduces his exposure to Hong Kong and expands his empire overseas -- from Ireland to Australia. Companies including Cheung Kong, Power Assets and Hutchison Whampoa have been looking for acquisitions outside of Hong Kong in regulated and transparent markets that offer a steady yield.

Cheung Kong Infrastructure and Power Assets, both controlled by Li Ka-shing, are jointly bidding for Fortum’s Swedish power grid and have reached out to lenders for a loan of about $5 billion to $6 billion.

In May, a consortium including Cheung Kong Infrastructure, Cheung Kong Holdings and Power Assets, agreed to buy Australia’s gas distributor Envestra in a deal that values the latter at A$2.4 billion ($1.97 billion).

RBC declined to comment while Cheung Kong Infrastructure did not respond to a request for comment.