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In a move aimed at stimulating growth in Germany’s rail sector, Deutsche Bahn (DB) has sold its subsidiary, Arriva, to US investment firm I Squared Capital for €1.6bn (£1.4bn). The deal, announced on Thursday, is part of DB’s strategy to concentrate on core operations and is expected to conclude by 2024, subject to regulatory approval.
Arriva, which operates in ten markets including the Netherlands and the UK, employs about 5,500 people. In the UK, it operates London’s red buses with a 4,700-strong fleet and rail services such as London Overground, Chiltern Railways, and CrossCountry franchises.
I Squared Capital, a US-based infrastructure investor with $37bn (£30.5bn) in total assets, plans to invest an additional €2bn in Arriva for fleet expansion and electrification as part of decarbonization efforts. This acquisition comes after I Squared’s unsuccessful £1.2bn bid for FirstGroup last year. The firm’s other European investments include UK power companies Conrad Energy and Aggreko (LON:).
Deutsche Bahn bought Arriva for €2.7bn in 2010 to lessen its debts and has now sold it at a loss. According to InvestingPro data, Deutsche Bahn’s market cap is currently at 20737.23M USD with a P/E ratio of 4.18. Despite the sale, Deutsche Bahn has shown promising signs of growth, with a revenue growth of 8.7% and an increase in earnings per share, as stated by InvestingPro Tips.
Both Mike Cooper, Arriva’s CEO, and Levin Holle, Deutsche Bahn’s CFO, have expressed positive expectations about the deal’s impact on Arriva’s future growth. Cooper welcomed the acquisition and highlighted I Squared’s commitment to providing long-term capital for innovation across Arriva’s services, assets, and workforce. He also noted the firm’s track record of supporting companies offering essential services.
Mohamed El Gazzar represented I Squared Capital in the transaction. El Gazzar’s confidence in the acquisition is likely bolstered by Deutsche Bahn’s strong position in the Capital Markets industry and its profitability over the last twelve months, as noted by InvestingPro Tips.
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