Deutsche bid for Arriva is not certain

City A.M. Reporter
Deutsche Bahn (DB) has not decided if it might try to buy British train and bus operator Arriva and will bid only if the move makes economic sense, the German state railways’ chief executive said.

“We have decided to enter into talks with Arriva. It is still unknown if these talks will lead to DB making an offer to buy Arriva,” Ruediger Grube told a news conference yesterday to unveil the German rail and logistics operator’s 2009 results.

Deutsche Bahn is talking to Arriva, led by chief executive David Martin, in light of the structural changes expected as the passenger transport market opens in Europe, Grube said.

Arriva’s shares are up 60 per cent since 27 January, the day before news broke that it was in talks -- since ended -- with the French state railway group SNCF about an equity tie-up with European train and tram operator Keolis, an SNCF affiliate.

Grube would not be drawn on whether the surge in Arriva’s market value would be too much for Deutsche Bahn to digest.

“Every price frightens me,” he replied when asked whether Arriva’s share price jump put it beyond reach.

“We will carry out the talks but we will not do anything that is economically nonsensical,” he added.

Market speculation had linked the German group with a 700p-per-share bid, valuing the UK business at just under £1.4bn before debt. Arriva had net debt of £852m at the end of 2009.

Deutsche Bahn is targeting new markets after net income fell 37 per cent to €830m (£744m) last year following a 12 per cent drop in sales to €29.3bn.

Deutsche Bahn also plans to run high-speed trains through the Channel Tunnel to boost sales.