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April 22, 2010

DB confirms £1.6 billion Arriva takeover

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GERMAN Rail (DB) confirmed this morning that it will go ahead with a £1.6 billion takeover of British train and bus operator Arriva. The £7.75-a-share deal, which is the largest acquisition ever made by DB, was approved yesterday by the DB supervisory board and has also been ratified by the German government.

Speaking at a press conference this morning, DB CEO Mr Rüdiger Grube confirmed that under European antitrust law, it will sell Arriva's German rail business to a third party. "We said at the beginning we do not see it as a deal breaker if rail activities need to be sold," he said.

Arriva has steadily expanded its portfolio of German operations in recent years to become a major competitor to DB in the regional rail market. Its subsidiaries include Prignitz Railway (PEG), East Hannover Railway (OHE) and Regentalbahn. It also operates Alex services in Bavaria.

Grube predicts that DB-Arriva will become one of just a handful of large companies that will in future dominate the liberalised public transport market in Europe.

The future of Arriva has been the subject of intense speculation in recent months. In February the company confirmed it was in talks with French National Railways (SNCF) regarding a possible merger with Keolis to create a European transport group. When these discussions ended in failure last month, Arriva entered talks with DB which, despite rumours of a counterbid from SNCF, has gone on to secure a deal. Grube says DB was determined to buy Arriva but was not prepared to enter a bidding war.

Arriva operates two passenger franchises in Britain, Arriva Trains Wales, and CrossCountry, and runs regional services around Groningen in the Netherlands. It has operated trains in the Swedish region of Skåne since June 2007 and last year Arriva secured a second eight-year contract to operate regional services in western Denmark, ironically fending off a rival bid from DB Regio.
db-arriva.jpgUnder European competition laws, DB will be required
to sell Arriva's German rail business, which includes
Bavaria's Alex network.
Photo: Keith Fender

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