Deutsche Bahn to buy Arriva

[John Ashworth]

German bid for Arriva in closing stages

Deutsche Bahn group could seal £1.6bn deal this week

* Tim Webb
* guardian.co.uk, Sunday 18 April 2010 19.53 BST

The takeover of one of Britain's largest public transport groups by Deutsche Bahn could be agreed by the end of the month, according to reports this weekend.

Analysts say that the £1.6bn deal to buy Arriva, if completed, is likely to be the first of many similar deals across Europe as legislation opens up the market to competition.

Due diligence is understood to be well advanced and the board of the German state-owned firm will meet this week to approve a formal bid for Arriva. Arriva declined to comment today.

The Sunderland-based group operates most of London's red buses, as well as most rail services in Wales and the CrossCountry rail franchise. It also operates services in 11 other countries in Europe.

Deutsche Bahn, which made an approach for Arriva last month, is thought to be in exclusive talks with the company. French group SNCF had been interested in mounting a rival bid but has dropped out after failing to secure support from the French government, it was reported.

If the deal is completed, Arriva would become the first large British transport group to be taken over. National Express came closest to a change of control last year after Spain's Cosmen family, which owns almost 20% of the group, teamed up with private equity outfit CVC but decided not to go ahead with a bid.

Europe's largest transport groups are jockeying for position as they seek scale to take advantage of both the liberalisation of the market over the next decade and cash-strapped local authorities looking to attract private investment into their bus and rail networks. Deutsche Bahn, which has been earmarked for partial privatisation, has already made inroads into Britain, acquiring Laing Rail, the owner of Chiltern Railways and operator of services between London and Birmingham.

[John Ashworth]

Deutsche Bahn close to £1.5bn Arriva takeover

Transport group confirms 775p a share cash offer by German giant

* Owen Bowcott
* The Guardian, Tuesday 20 April 2010

The UK transport group Arriva – which runs most of London's red buses and two major rail franchises – has confirmed that it is on the verge of takeover by the German transport operator Deutsche Bahn.

Responding to speculation about a £1.5bn deal, the Sunderland-based firm acknowledged it was in "advanced discussion" with the German state-owned enterprise. The deal could be the first in a series of consolidations in the transport industry as the European market is opened up to greater competition.

Arriva said that its German suitor was making a cash offer of 775p per share, with an 18.8p a share final dividend for Arriva investors for last year. The proposal is subject to a due diligence review, unanimous recommendation by the Arriva board, and approval by DB boards and the German ministries of transport, finance and economic affairs. The German company, which already operates UK services such as the Chiltern Railways route between London and Birmingham Snow Hill, confirmed interest in Arriva last month.

Arriva, the UK's third biggest transport firm,had attracted takeover interest from France's SNCF earlier this year. The statement from Arriva said: "The board … confirms that it is in advanced discussion with Deutsche Bahn about the terms of a possible recommended cash offer."

Arriva runs two rail franchises in the UK, one in Wales and the other CrossCountry, which covers 1,400 miles and calls at more than 100 stations between Aberdeen and Penzance, Bournemouth and Manchester and Cardiff and Stansted. The company also runs bus services in Liverpool, Leeds, Leicester, Glasgow and Newcastle, and 12 mainland European countries.

Deutsche Bahn is also involved in the running of the open access operator Wrexham, Shropshire and Marylebone Railway and is joint operator of the London Overground service. The company has around 240,000 employees in 150 countries.

[John Ashworth]

Arriva takeover bid revives foreign takeover row

Move by Deutsche Bahn to buy UK bus and train operator threatens to become election issue

* Terry Macalister and Dan Milmo
* guardian.co.uk, Thursday 22 April 2010 20.25 BST

Foreign ownership of strategic British assets threatened to become an election issue tonight after a political row began to gather around a £1.5bn move by the German state-owned railway company Deutsche Bahn to buy UK bus and train operator Arriva.

Vince Cable, the deputy leader of the Liberal Democrats, said that the deal highlighted the stupidity of a government decision to scrap the public interest test when it revised the takeover code eight years ago.

Digby Jones, minister for trade in Gordon Brown's first year as prime minister, and a past head of employers' body the CBI, said he had considerable "reservations" about whether these kinds of deals were appropriate.

The controversy surrounding foreign acquisitions intensified last year when American food company Kraft launched a hostile – and ultimately successful – bid for chocolate maker Cadbury, causing embarrassment for ministers.

But the latest bid for a key UK company has raised the stakes because it has the added complication of coming from a state-owned body – DB is 100%-owned by the German government. A successful bid would in effect mean that a privatised British rail service had been renationalised overseas.

Cable said: "I have no problem with the principle of foreign ownership but the government made a mistake in 2002 when it removed the public interest [test] for takeovers that could have stopped the Kraft deal. It should be possible in cases where publicly owned utilities are involved for an investigation on a national-interest basis."

Jones said he also believed that serious questions were being raised by the spate of companies being bought by foreign predators: "I am not saying I would put a stop to them but I do think we need politicians, regulators and consumers to engage in a public debate about overseas takeovers. They would need to look at whether you can do it [a foreign takeover] in their country and whether the buyer is owned by the state. That is an important point."

The RMT union expressed its concern after Deutsche Bahn announced a recommended cash offer for Arriva. The Sunderland-based transport operator owns the Cross Country and Arriva Trains Wales franchises and bus networks across the UK, as well as public transport operations in European countries including Denmark, Germany and Spain.

Bob Crow, the union's general secretary, said there was a danger that profits made on British railways would be exported and reinvested in the German transport network.

DB predicted a dominant role for state-backed transport groups across Europe today, forecasting that control of all bus, rail and coach networks on the continent would be divided between a maximum of five businesses.

Its chief executive, Rüdiger Grube, said liberalisation of transport systems across Europe, including those in France and Germany, would create between three and five super-groups. "It will take place within the next 10 years, there is no doubt about it," he said, adding that France's state-owned rail company, SNCF, would probably be one of them. Asked if state-backed companies would be among the prime contenders to become a super-group, Grube said: "Yes."

Deutsche Bahn is already a significant player in the UK rail market through its ownership of the British rail freight business formerly known as EWS and Chiltern Railways, which operates a passenger franchise between London and Birmingham. That presence will be significantly reinforced by the Arriva deal.

Other state-backed transport groups with a foothold in the UK market include Abellio, formerly Holland's NedRailways, which operates the Northern Rail and Merseyrail franchises, and SNCF, which has a shareholding in the cross-channel Eurostar service.
Over here

Foreign governments already have a grip on a whole range of British assets deemed important by politicians and members of the public alike: from the railway services to postal deliveries and even football clubs.

Deutsche Bahn already runs the royal train in Britain as part of its control of EWS – renamed DB Schenker Rail (UK) Ltd – while also operating passenger services on Chiltern Railways.

But the German state's incursion into the UK railway system is not unique. The Dutch state-owned operator, NedRailways, has also taken over slices of the British network, operating trains on the Merseyrail and Northern Rail franchises in conjunction with UK services firm Serco. The French state-owned railway group, SNCF, is also the major shareholder in the Eurostar business that controls the passenger rail services between St Pancras station in London and Paris and Brussels. The French firm Connex once ran the busy south central commuter route before it was removed from the franchise.

The British energy sector has also seen major inroads from state-owned foreign groups, with Électricité de France (EDF) buying up nuclear operator British Energy as well as local UK electricity supply groups.

The UK's biggest atomic complex at Sellafield in Cumbria is now part-managed by Areva, a company 90%-owned by the French state. Areva is also a part operator of the UK's only low-level waste repository, at Drigg in the same region.

German state-owned telecoms operator Deutsche Telekom snapped up T-Mobile in this country while Deutsche Post – also part-owned by the Berlin government – was the first to break the Royal Mail's UK postal monopoly by winning a licence to deliver letters here.

There have also been advances by foreign state-owned groups through sovereign wealth funds, with the most notable being the £4bn purchase of P&O by Dubai and the Abu Dhabi purchase of Manchester City football club.