Arriva in merger talks with French firm Keolis

Jan 29 2010 by Iain Laing, The Journal

TRANSPORT firm Arriva has revealed that it has held talks with France’s national rail operator SNCF over a merger which could create a new European giant.

The Sunderland-based company said it had held “very preliminary” talks over a potential tie-up with “all or part” of Keolis, which is 44.5% owned by SNCF.

Keolis – which has the largest bus and coach fleet in France – employs 40,000 staff with operations in Europe, Algeria, Australia and Canada.

In the UK it is a minority shareholder in the Govia joint venture with Newcastle-based Go-Ahead, which operates the Southern, Southeastern and London Midland rail franchises.

Arriva said a deal “would create a significantly enhanced and leading European transportation business focused on the increasing liberalisation of the transportation market in Europe”.

Arriva, which has 44,000 staff at bus and train companies in 13 countries in Europe, runs the Cross Country UK rail franchise that stretches from Aberdeen to Penzance.

It has expanded far more heavily than rivals in Continental Europe, opting to take advantage of the privatisation of bus and rail networks in the European Union. But yesterday the company stressed that talks were at a “preliminary exploratory stage” with no certainty of any agreement.

The combination of the two businesses would create a transport giant with revenues of almost £6bn – and throw down the gauntlet to the UK’s current biggest transport firm, FirstGroup, which had revenues of £6.2bn in the year to March 31.

For 2008, Arriva posted revenues of £3bn, with Keolis delivering turnover of £2.8bn. Of this, 56% of sales were in France with the remainder from its international operations.

In France, Keolis operates 80 urban bus networks – including a fleet of 5,000 buses and more than 15,000 employees – as well as nearly 200km of light rail such as Metro and tram services.

The tie-up would also be a good fit for Arriva’s mainland European division, which reported £1.4bn in revenues for 2008, but lacks a significant presence in France to match its operations in other major European countries and Scandinavia.

At the end of last year Arriva said that revenues in the UK bus division increased by 4.4% in the 11 months to November 30, compared with 4.9% in the nine months to September.

But revenues from its mainland Europe division grew by 5.8% in the 11 months to November 11. Excluding the impact of acquisitions made in 2008, the figure was 2.4% higher.