Deutsche Bahn takes over Arriva – A GBP 1.5 Billion transaction

The liberalisation of the railway passenger transport market has created a significant growth potential for German operator Deutsche Bahn (DB) and the long-awaited opening of the markets will further develop this opportunity. As a result, DB is focusing on the passenger transport sector in Europe. The takeover of British operator Arriva will provide DB with a real platform for service development in Europe.

Two large European operators fought to takeover Arriva: Deutsche Bahn and SNCF. When the German Government was preparing to back the offer made by DB, Dominique Bussereau, Secretary of State at the French Ministry of Transport, said: “We are open to any project that could help SNCF develop and expand”. However, the stakeholders of the British company had already chosen the offer made by DB, to the detriment of SNCF’s proposal for a merger between Arriva and French transport company Keolis, where the previously major stakeholders of Arriva would become minor stakeholders. When DB made its first offer, two of the first ten major stakeholders of Arriva demanded that DB should offer more than the share value. According to market estimates, which the two operators did not confirm, the negotiations were led for 700 pence per share. “We believe that Arriva has a value much higher than this offer. Even with the increase in the share price, we believe that the offer is under-evaluated”, said one of the main stakeholders when DB first submitted its offer in March.
On April 22, 2010, DB announced the takeover of Arriva, with an offer of 775 pence (GBP 7.75), the total value of the transaction amounting to  GBP 1.585 Billion (EUR 1.830 Billion). The amount paid in cash, as it is stipulated in the takeover contract, will be financed from company resources. According to Utz-Hellmuth Felcht, Chairman of the Supervisory Board, the transaction was approved after intense discussions and based on an independent evaluation report elaborated by a major bank.
“By making this decision we would like to outline the fact that Germany will continue to be the main market for DB. This will not affect our German customers in any way”, said Felcht. “The activities of the British operator will consolidate DB’s strategic position on the European market, especially due to the success recorded by Arriva and the rapid growth of the transport markets which are of strategic interest for DB”, said Rüdiger Grube, CEO DB, after the takeover.
“The management team and the employees have managed to turn Arriva into an independent European leader on the passenger transport market, with activities developed in 12 countries. DB welcomes this opportunity and wishes to continue to improve and expand Arriva’s position and capacities in order to contribute to market development. This offer reflects the value of the business we have built”, said on this occasion Richard Broadbent, President Arriva.
Arriva develops its activities through three divisions: UK Bus, UK Rail and Mainland Europe and is one of the largest transport groups in Europe. Arriva is present in 12 countries: Czech Republic, Denmark, Germany, Hungary, Italy, Netherlands, Poland, Portugal, Slovakia, Spain, Sweden and UK. In UK, Arriva manages several train and bus networks, including most of the railway passenger services in Wales.
At the end of 2009, Arriva reported revenues of  GBP 3.1 Billion (around EUR 3.5 Billion), with an EBIT of  GBP 121.7 Million (EUR 140 Million).
Deutsche Bahn delivers services in over 130 countries, as one of the largest passenger and logistics operators in the world. In fiscal year 2009, the company’s revenues reached EUR 29.3 Billion, with an EBIT of EUR 1.7 Billion.
DB carries over 5 million passengers/day and approximately 1 million tonnes/day. In Germany, DB operates on a 34.000 km network.

by Pamela Luică

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