Chief executive Ruediger Grube said Deutsche Bahn-Arriva would become one of just a few strong players in the rail, bus and logistics industries as Bahn expands internationally to take advantage of a more liberalized transport market in Europe.
“We intend to be the drivers and not the driven,” Grube said, adding that the deal was aimed at growth, not cost cuts.
Sunderland, Northeast England-based Arriva -- Britain’s third-biggest bus company, also runs franchises and other services in 12 European countries, making it one of the continent’s few stock-exchange listed transport operators with a wide international footprint.
Deutsche Bahn, already Europe’s biggest transport group, is looking to its transport and logistics businesses to boost revenues by 5 percent this year after the recession cut sales by 12 percent to 29 billion euros in 2009.
Grube said the German rail operator was determined to buy Arriva but was not prepared to enter a ruinous bidding war should another suitor emerge. France’s SNCF showed interest earlier this year but broke off talks in March.
Bahn’s offer values the share capital of Arriva at about 1.585 billion pounds ($2.4 billion).
VERY FULL PRICE
Citi analyst Roger Elliott played down the likelihood of a wave of consolidation, saying that Deutsche Bahn was in a unique position.
“We see echoes of the pre-IPO acquisition spree of Deutsche Post in the late 1990s, similarly sanctioned by the sole state shareholder, to diversify away from a narrow core business increasingly exposed to competition,” he said in a note.
Elliott also said that unlike rivals, Deutsche Bahn had largely completed the global expansion of its freight business and that broadening its exposure to the European passenger network ahead of liberalization therefore made sense.
Deutsche Bahn’s Grube said the group would have to sell Arriva’s German rail activities to meet EU anti-trust rules.
The merger deal gives Arriva shareholders 775 pence in cash for each Arriva share they hold. They will also be entitled to a final dividend of 18.8 pence per share.
Elliott said the 775 pence offer, which is equal to 16 times estimated 2010 earnings, was a “very full price” relative to peers and based on Arriva’s own history.
Deutsche Bahn’s Grube earlier this week fended off criticism from politicians over the deal, which is the most expensive in the company’s history.
“If it was too expensive, we would not have done it,” Grube said, adding that the takeover would not cut Bahn’s plans to invest 41 billion euros ($55 billion) in service and quality improvements in Germany over the next five years.
Sources told Reuters earlier this week that the offer totaled 2.7 billion euros when Arriva’s debt was included.
Grube said a stock exchange listing for Deutsche Bahn remained an option but added it was unclear when it might take place.
Reporting by Paul Hoskins in London and Jonathan Gould in Frankfurt; Additional reporting by Markus Wacket in Berlin; Editing by Andrew Callus
Our Standards: The Thomson Reuters Trust Principles.