Deutsche Bahn in approach for Arriva

The state-owned rail group Deutsche Bahn has made a takeover approach for Arriva, the UK bus and train operator confirmed yesterday.

News of the offer, which could value Arriva at £1.4bn, follows the collapse of merger talks with France's state railway group, SNCF, earlier this month.

"Arriva confirms it has received an unsolicited approach from a third party about a possible offer for the company. There can be no certainty that any offer will be forthcoming," the UK group told the Stock Exchange yesterday.

Arriva's shares soared 97.5p, or 17 per cent, to close at 677p, giving it a market capitalisation of £1.35bn. Its shares have gained nearly 50 per cent over the past seven weeks.

Although Arriva declined to comment on the identity of its suitor, sources close to the deal confirmed that Deutsche Bahn had made an approach. The German group, which was unavailable for comment, is believed to have made an indicative 700p a share offer.

ComfortDelGro, the Singaporean company which runs London's Metroline bus firm, has also been linked to a potential bid for Arriva.

The past year has seen plenty of corporate activity skirmishes among Europe's biggest transport companies. Last year, the rival bus and train operator National Express faced three attempts to acquire its assets, although a deal never materialised.

The Sunderland-based Arriva runs train and bus services in 12 European countries, including the CrossCountry inter-city rail operator in the UK. It is one of London's biggest bus companies and is the largest bus operator in Italy and Denmark. On 5 March, Arriva confirmed that "exploratory preliminary discussions" took place with SNCF about merging it with the French operator's Keolis subsidiary, but said that talks had ceased.

Two days before, the UK-based company had posted pre-tax profits down by 19 per cent to £121.7m for the 12 months to 31 December 2009, but it touted a "strong run of contract wins and renewals". For instance, Arriva said its order book for mainland Europe had jumped by 29 per cent in euros.

At the time, David Martin, Arriva's chief executive, said: "Trading is healthy in most mainland European countries, our UK bus business is showing continuing strength, and the acceleration of passenger revenue growth in our UK rail franchises is encouraging."

He added: "Passenger revenue in CrossCountry is up by 8.8 per cent in the first seven weeks of 2010, helping to offset the lower franchise support payments it will receive in 2010. With a £30m reduction in fuel costs in 2010, new contracts already secured, and passenger revenue support available to CrossCountry late next year, I am confident that the group has excellent prospects for substantial progress."