Updated, 14:39: to include CMA CGM confirmation of bid withdrawal

CMA CGM has pulled out of the race for a stake (49%) in France’s biggest rail freight player, Rail Logistics Europe (RLE), according to a report in the French media.

Contacted by The Loadstar, CMA CGM said: “CMA CGM has decided not to proceed with the RLE project, as it does not align with the Group’s current investment priorities.”

The news of the French ocean shipping line withdrawing its shareholding bid for RLE, which groups all the French state rail freight business units, has not come as a complete surprise to industry observers.

Chairman and CEO Rodolphe Saadé made it clear from the outset that he was only interested in a small proportion of RLE’s activities, most likely, those involved in the transport of maritime containers. Such a position does not correspond with SNCF’s strategy, which focuses on finding a partner ready to take a stake in all RLE’s activities.

“CMA CGM pulling out doesn’t surprise me. First of all, there is appears to be a personality clash between the two protagonists; SNCF chairman Jean Castex and Rodolphe Saadé. It seems that they have met on three occasions and that each time things went badly. Two strong egos, no doubt,” an industry source told The Loadstar.

“I also think SNCF has failed to take into account that even if a multi-hundred million investment is a relatively minor sum for CMA CGM, it nevertheless entitles it to a say in the governance of RLE – guarantees it didn’t get, as Mr Castex isn’t one to share power.”

The source noted that Mr Saadé’s interest in RLE focused largely on Naviland Cargo (maritime containers), a segment chief rival MSC is quickly building up a presence in, via its subsidiary, Medway.

However, Naviland was not the only attraction that led CMA CGM to RLE. The latter also has considerable expertise in finished vehicle transport across Europe, which would have complemented the French group’s logistics arm, Ceva, the source added.

Earlier this year, CMA CGM completed the acquisition of UK operator Freightliner to boost its intermodal services, taking over 2,000 wagons, 10 terminals, and one of the largest fleets of electric locomotives in the UK.

Selling 49% of RLE’s capital was one of the conditions in an agreement between the EC and the French state on the break-up of Fret SNCF, which was suspected of receiving billions of euros in illegal aid.

CMA CGM’s withdrawal, if confirmed, would mean that three candidates remain for the stake in RLE: Czech billionaire Daniel Kretinsky; German logistics group Rhenus; and an unidentified private equity fund.

The source, who had previously considered CMA CGM the “ideal buyer”, underlined that the French group pulling out had left SNCF and the French government in something of a quandary,

“I can’t really see France relinquishing its sovereignty over the transport of military equipment (to a foreign company), as RLE handles at least 80% of the French army’s military transport operations.”

France’s biggest rail freight player, RLE, posted revenue for the first half of the year of €948m, a year-on-year increase of 3.9%. EBITDA increased to €118m, versus €110m a year earlier, the margin improving from 12% to 12.5%.