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US investor takes over railway subsidiary
October 19, 2023, 12:09 p.m
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Years ago, Deutsche Bahn decided to sell its local transport subsidiary Arriva. Now a buyer has been found. Rail transport in Germany is expected to grow as a result, and the sale will free the state-owned company from obligations worth billions.
After years of delays, Deutsche Bahn is selling its international local transport subsidiary Arriva to US infrastructure investor I Squared Capital. The contract has been signed and the transaction should be completed in 2024, both Bahn and I Squared Capital announced. They did not provide any information about the price. Insiders had said the contract valued Arriva at 1.6 billion euros, which included debts of around one billion euros.
The railway supervisory board and the Ministry of Transport still have to agree on what is considered safe. Arriva, based in Great Britain, operates buses and local trains in several European countries. Arriva, with around 35,000 employees, also owns the red double-decker buses in London. The railway bought Arriva in 2010, but expectations of expansion in Europe were largely not fulfilled. The sales plan was decided years ago.
On the one hand, the heavily indebted state-owned company will get rid of Arriva’s debts of one billion euros. On the other hand, the necessary investments in Arriva will no longer be necessary. Train routes would have to be electrified and buses would have to be converted to more climate-friendly drives. Above all, the state-owned company is expected to see an improvement in its domestic business in Germany, which CFO Levin Holle also emphasizes: “For Deutsche Bahn, this is an important step to focus even more on future growth in rail transport in Germany.”
Arriva fleet aims to make air cleaner
Gautam Bhandari from investor I Squared pledged investments in Arriva to make the fleet climate-friendly. “With our investments in green public transport, we want to ensure cleaner air in metropolitan areas.”
Since a complete sale of Arriva failed in recent years because the hoped-for revenue could not be achieved, the railway initially began to sell off individual national companies. This includes sales in Sweden and Portugal last year and in Serbia, Denmark and Poland (Bus) this year. The core area with Great Britain and companies in France, the Netherlands and several Eastern European countries are now being sold.
Arriva had sales of around 4.2 billion euros last year, but made virtually no profit. The international activities of the state-owned company are under observation in the traffic light coalition, especially by the Greens and the FDP. The sale of the logistics subsidiary Schenker is also being considered so that the railway can concentrate on the business and the problems in Germany.