Sernam to repay €642m in EU state aid, as buyer comes forward

The European Commission has ordered troubled French parcel delivery company to repay EUR 642m in “unlawful” state aid, plus interest, after an in-depth investigation. The company, which split off from French national railway operator SNCF in 2005, called in the receivers in January and majority owner Butler Capital Partners is currently looking for a buyer.

But one of the major uncertainties holding up the transition to new ownership was how much the European Union would want paid back to the French government from state support handed out to Sernam while it was part of SNCF.

Under European Union competition laws, governments cannot financially support companies to safeguard their positions within a competitive market, although there are some exemptions available in the case of, for example, universal postal service providers.

“Unfair”

Back in 2001, the EU’s executive branch, the EU Commission, allowed the French government to inject EUR 503m into Sernam to allow a restructuring of the state-owned company.

However, privatisation of the company in 2005 broke the conditions set for that state aid, and on Friday the Commission confirmed it now wants the money back.

The Commission said on Friday it also wants EUR 100m in state aid returned that was provided to help the privatisation process.

And, it also wants a EUR 41m sum returned stemming from a sale of Sernam assets, a repayment that was was back in 2004, but which has still not been repaid.

“All these subsidies have given Sernam an unfair economic advantage over its competitors and they must be repaid in order to allay the distortion of competition they have provoked in the internal market,” said the Commission in a statement.

Sernam and its subsidiaries is now responsible for repaying a total of EUR 642m plus interest, the Commission said on Friday. The French government is now considering an appeal of the findings.

“The French government does not share the view of the Commission and will examine the decision in detail to evaluate whether it should take any action,” said the French Ministry of Transport in a statement on Friday.

The Ministry added that it wanted to settle the issue as quickly as possible so there would be no consequences for potential buyers.

Sale

Friday also saw the deadline passing for companies interested in bidding to buy Sernam to come forward. The company confirmed following the end of the deadline that two bids were received as joint proposals by Geodis Calberson and its joint-owned subsidiary BMV. The Geodis logistics group is owned by SNCF, Sernam’s previous owners.

Sernam said in a statement that the bids would seek to maintain 826 jobs at the company.

The bids will form the basis of negotiations for the next few weeks, with the possibility that receivership conditions could be lifted by the courts in late March or early April, the company said.

Philippe Chevalier, the Sernam president, said in a letter to customers on Friday that any sale would require approval from the European Commission.

“While the Commission reviews the bids, the administrator and our teams will use the coming weeks to complete, as appropriate, the operational, social and legal conditions of each applicant’s recovery projects,” said Chevalier.

“Subject to the availability of final offers and the position of the European Commission on each recovery project, the commercial court of Nanterre could consider recovery procedures in late March or early April.”