Deutsche Bahn Sells Arriva Group to I Squared Capital
As Deutsche Bahn Sells Arriva Group to I Squared Capital, the latter’s heavy investment promises renewed growth for the iconic red bus operator.
Deutsche Bahn and Miami-based infrastructure investor I Squared Capital have officially inked a deal for the acquisition of Arriva Group, the international transport arm of the German rail operator.
The transaction is slated to finalize in 2024, pending standard closing prerequisites, including the nod from Deutsche Bahn’s supervisory board and the German transport ministry.
Meanwhile, the Arriva Group has taken to Twitter to welcome the Deutsche Bahn I Squared deal.
We warmly welcome the news that an agreement between Deutsche Bahn and I Squared Capital has been signed for the sale of the Arriva Group, including our operating businesses across 10 countries. Read more here ➡ https://t.co/ZRoslmKMKt pic.twitter.com/BSMaqxloK4
— Arriva Group (@ArrivaGroup) October 19, 2023
As reported earlier by Reuters, the sale is anticipated to set Arriva’s valuation, which oversees iconic red London buses and UK train services, at approximately 1.6 billion euros ($1.68 billion), inclusive of existing debt.
This development marks a significant stride in the evolution of Arriva’s global transport operations.
What is Deutsche Bahn?
Deutsche Bahn is the German state-owned railway company. It is one of the largest railway operators in the world, with over 340,000 employees and a network of over 33,000 kilometers of track.
Deutsche Bahn operates a wide range of passenger and freight services, including high-speed trains, regional trains, and buses.
What is I Squared Capital?
I Squared Capital is a global infrastructure investment firm. It has over $50 billion in assets under management and invests in a wide range of infrastructure projects, including transportation, energy, and telecommunications. I Squared Capital has offices in New York, London, Hong Kong, New Delhi, and Miami.
I Squared Capita has been making significant investments in the emission-free buses, transport and logistics technologies.
Their notable investments encompass a spectrum of ventures, including TIP Group, a freight services expert, where they’ve made substantial strides in fleet modernization.
Additionally, they’ve been instrumental in propelling the growth of Aggreko, a global energy solutions powerhouse headquartered in Glasgow.
What is Arriva Group?
Arriva Group is a UK-based bus and train operator. It is one of the largest operators of public transport in the UK, with over 60,000 employees and a fleet of over 30,000 vehicles.
Arriva Group operates buses and trains in cities and towns across the UK, as well as in other European countries and North America.
Arriva, a key player in the transportation sector, caters to a staggering 1.5 billion rail and bus passengers every year, spanning across ten different countries.
In the UK, Arriva manages a fleet of 4,700 buses and holds sway over 15% of the passenger network, which includes the pivotal London Overground, CrossCountry, and Chiltern Railways franchises. Their extensive reach and operational scale underscore Arriva’s pivotal role in the global transportation landscape.
Why is Deutsche Bahn Selling Arriva Group?
Deutsche Bahn has been looking to sell Arriva Group for several years in order to focus on its core business in Germany.
Deutsche Bahn has also been facing financial challenges, and the sale of Arriva Group will help to reduce its debt and improve its financial performance.
As per the Financial Times, Arriva experienced a 3.6% year-on-year increase in annual sales, reaching €4.2 billion in 2022, as reported in Deutsche Bahn’s annual review. Notably, this contributed to 7.5% of the German conglomerate’s overall revenue.
Despite its substantial revenue, the unit’s profitability remains marginal, with an adjusted operating profit of a mere €12 million in the last fiscal year.
This marks a significant turnaround from the operating loss of €73 million reported in 2021, indicating a notable improvement in financial performance.
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Why is I Squared Capital buying Arriva Group?
I Squared Capital is a major investor in transportation infrastructure, and it sees Arriva Group as a strategic investment.
Arriva Group has a strong track record of profitability and growth, and it is well-positioned to benefit from the investment that the I Squared Group will pump in for its growth and support.
In the long run, the sale is expected to lead to new opportunities for Arriva Group to expand its business and operations.
Conclusion of the Deutsche Bahn and I Squared Capital Deal
The sale of Arriva Group by Deutsche Bahn to I Squared Capital is a major deal for both companies and for the transportation industry as a whole.
The sale will allow Deutsche Bahn to focus on its core business in Germany and reduce its debt, while I Squared Capital will be able to invest in Arriva Group and support its growth.
The sale is also a sign of the continued growth and consolidation of the global bus industry.
