Germany’s Deutsche Bahn and Miami-based infrastructure investor I Squared Capital have signed an agreement to sell the German rail operator’s international transport business Arriva Group. The transaction is expected to be completed in 2024, subject to the customary closing conditions, including the approval of the Deutsche Bahn’s supervisory board and the German transport ministry, they said in a statement. Arriva is a multi-national passenger transport company that operates bus, coach, and train services in the UK and several continental European countries. The group also manages London’s iconic red double-decker buses. It currently employs about 35,500 people.
Arriva’s business in the UK is its largest operation, with a network that includes the Cross Country and London Overground train franchises. Its buses are used by millions of passengers every year. The firm’s other primary operations are in Spain, where it operates services on three of the four main highways connecting the cities of A Coruna, Lugo, and Ourense, and in Majorca, where it has around 5,900 buses serving the island’s main urban centers as well as tourist destinations.
A sale of Arriva would help Deutsche Bahn streamline its operations and slash debt as it seeks to modernize its domestic railroad operations. The company has a large debt load of more than 50 billion euros.
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The deal is part of Deutsche Bahn’s strategy to concentrate on core markets and refocus its growth ambitions in a highly competitive environment. The company seeks to reduce its debt burden and improve profitability through asset sales and cost cuts. The company will use the proceeds from the Arriva sale to invest in new rail lines and upgrade existing ones and in digitalization and electrification projects across the continent.
DB has worked with Arriva over the past few years to stabilize the business post-Covid and to refocus its sustainable growth strategy on relevant markets. This has included the sale of Arriva businesses in non-core markets, such as Arriva Sweden and Portugal in 2022 and Arriva Serbia, Denmark, and Poland (Bus) this year.
Arriva’s business in central and eastern Europe is dominated by bus transport, focusing on the Czech Republic, Hungary, and Slovakia. Its subsidiaries in those countries operate 1*5 billion passenger journeys per year on bus, coach and tram, and water and bike-sharing services.
The company also has a significant presence in southern Europe, focusing on the Italian market. Its subsidiaries in Italy provide train, ferry, and airport services. In 2022, it operated around 2*4 billion passenger journeys in Italy. The company’s other European operations include the Netherlands, the Czech Republic, and the Balkan region. In Croatia, it operates a fleet of over 200 coaches and more than 500 buses. It also has a presence in Hungary and the Balkans, with joint venture companies in Romania and Bulgaria. It is a member of the Global Bus Alliance. I Squared Capital invests in essential infrastructure, such as transportation, logistics, energy, and utilities, in the United States and some high-growth markets in Asia and Europe.