Arriva confirms Deutsche Bahn talks

Apr 20 2010 by John Hill, The Journal

SUNDERLAND transport operator Arriva has confirmed that Deutsche Bahn is on the verge of making a £1.6bn offer for the company.

In a statement to the stock market yesterday, Arriva confirmed it was in “advanced discussions” with the German firm that runs the Tyne and Wear Metro system.

It added Deutsche Bahn had indicated it would be willing to offer 775p for each Arriva share, with Arriva investors entitled to get a final dividend for last year worth 18.8p a share.

Deutsche Bahn’s proposal is subject to a due diligence review, unanimous recommendation by the Arriva board and approval by its boards and the German Ministries of Transportation, Finance and Economic Affairs.

The announcement follows newspaper speculation, reported in nebusiness yesterday, that it would be seeking backing for the plan at a meeting tomorrow. The indicated offer is at the peak of the range of 750p to 775p suggested by such reports.

Deutsche Bahn had confirmed that it was in talks with Arriva last month, soon after Arriva’s talks with SNCF subsidiary Keolis broke down.

While the statement indicates interest from the company that took over the running of the Tyne and Wear Metro on April 1, Arriva added “there can be no certainty any offer will be forthcoming even if the conditions are satisfied or waived”.

Deutsche Bahn runs UK services such as Chiltern Railways and operates in 150 countries, although three-quarters of its 240,000 staff are based in Germany.

Transport analyst Gert Zonneveld of Panmure Gordon thinks Arriva’s established operations – which include services in 12 European countries, a 20% share in the London bus market and the CrossCountry and Arriva Trains Wales franchises – give a level of “strategic value” for Deutsche Bahn.

He said: “The odds are clearly on that this will happen. It’s a pretty good price. I wouldn’t say it’s a bargain. You never know who might pop up, but it’s unlikely that someone else would have a go at getting control of Arriva.”