Arriva buys stake in Hungarian firm

Apr 15 2008 by Karen Dent, The Journal

ARRIVA is driving its business further into the Eastern Europe market after agreeing to buy an 80% stake in the company that owns the biggest private bus operator in Hungary.

The Sunderland group will pay £25.4m plus net debt for the majority share in Interbus Invest, the holding company for Eurobus Invest which operates 840 buses and has 1,500 employees in Hungary and Slovakia

Once the acquisition is complete, Arriva will be operating in 12 European countries, including the UK. Arriva chief executive David Martin said: "This is a significant milestone for Arriva to enter two new markets with a business that is ready to develop the opportunities arising in those countries and contribute to Arriva’s European growth story."

The group, which employs more than 40,000 people and provides one billion bus and rail passenger journeys annually, set its sights on Hungary and Slovakia because their public transport markets are opening up to privately-owned operators.

Arriva spokesman Francis King said: "In Slovakia, there are two operating businesses that are currently 40% owned by the state and they are moving towards complete privatisation. There are further growth opportunities and other privatisations going on. Working with an established partner there is the best way for us to develop.

"Eurobus in the currently the biggest private bus fleet operating in Hungary. Later this year, 17 regional bus companies are due to be privatised. We want to be there with someone who knows the market and has firm roots in the transport business in those countries."

Under Hungarian law, Eurobus is not required to produce consolidated accounts but Arriva estimates its annual earnings before interest and tax to be approximately £2.8m.

Arriva secured its first foothold in Eastern Europe in 2006 when it acquired a bus company in the Czech Republic. It added two further acquisitions last year.

It also became part of the joint venture which runs the first private rail operator in Poland last year. Arriva, which last month reported a 17% rise in annual operating profits to £128m, is continuing to eye further acquisitions in Europe. It has previously announced ambitious plans to double the size of its mainland Europe business from its 2006 level within the next three years.

But yesterday Mr King stressed that Arriva would not buy businesses simply for the sake of expanding the group.

"We are looking for the right markets, with the right partners at the right time. It has got to be right for our business."

Founded in 1938

THE company that eventually became Arriva was started by Sir Tom Cowie’s father in 1938.

By the 1960s, Sir Tom had expanded the original second-hand motorcycle shop into a car dealership and floated it on the stock exchange in 1965. He remained with the business until 1993.

The group did not enter the public transport arena until 1980 when its made its first bus acquisition – London-based Grey-Green Coaches and with the purchase of the British Bus Group plc in 1996, it became one of the UK’s largest bus operators.

The business became known as Arriva in 1997, bringing together more than 140 different transport brands under the same name.

Arriva made its first move into the European rail market in 1999 when it entered into a joint venture in the Netherlands.