Istanbul sells fast ferry network for $861m

Istanbul has sold its fast ferry network for $861m (£525m) to a consortium of Turkish infrastructure groups and Souter Investments, the investment company of Brian Souter, founder of UK transport group Stagecoach.

The consortium beat four other bids in Friday’s auction, including a partnership of the Koç conglomerate, Turkey’s largest group, and the international ferry operator Stena.

The IDO ferry company, which had sales of TL231m (£93m) in 2010 from some 50m passengers, runs 10 fast ferries, 25 sea buses and 17 car ferries on routes within Istanbul and across the Sea of Marmara. It no longer owns the picturesque but less profitable vapur – the old-fashioned ferries plying commuter routes across the Bosphorus – which were put in a separate company to prepare IDO for sale.

Souter Investments, which has a 30 per cent stake in the winning consortium, declined to comment on Friday’s sale.

Last year Mr Souter paid £9.5m for a stake in Sunseeker Yachts, which makes yachts. He owns a stake in Fullers, a New Zealand ferry group operating out of Auckland harbour.

Souter’s partners – Tepe, Akfen and Sera Gayrimenkul Yatirim – already own stakes in TAV, the company operating Istanbul’s main airport, so can claim experience in mass transport and passenger behaviour.

Önder Sezgi, Tepe’s chief financial officer, acknowledged that the price of $861m was higher than many people had expected, but said IDO would be “a more successful business and better operating company” in future. The new owners would explore the options for new routes – potentially to the Aegean and Mediterranean coasts as well as closer to Istanbul – and would improve other services such as onboard catering, he said.

One challenge for the new owners, though, will be competition from a new road to be built linking Istanbul with Izmir, Turkey’s third-biggest city. Some of IDO’s most profitable routes are those crossing the Sea of Marmara, the fastest way to reach the northern Aegean, but a new bridge spanning the Izmit Gulf will cut journey times by road.

The winning bidders will also need “to strike a balance between providing a public service and profitability”, said Mete Yegin, a lawyer in Istanbul who advised another bidder.

IDO is the first big privatisation carried out by the city authorities, and is seen as a trial run for the sale of the gas distribution company IGDAS, which is likely to attract stronger international interest. The asset sales will fund investments in the city’s heavily congested transport system, strained by a population that has risen to 15m.

Additional reporting by Gill Plimmer in London