First Group back on track for Anglia after merger

By Michael Harrison,Business Editor
Tuesday 22 October 2013 05:52

The head of the Government's Strategic Rail Authority, Richard Bowker, denied yesterday that he had been outmanoeuvred after the train operator First Group unveiled an agreed takeover of its rival, GB Railways, worth up to £43m.

The move puts First Group in a strong position to win the Greater Anglia franchise after it was excluded from the shortlist of bidders by the SRA in April because its submission was "not up to scratch". The deal also marks the first takeover of one train operating company by another since the industry was privatised in 1996 and could be the catalyst for a wave of consolidation within the industry.

Mr Bowker said the decision to bar First Group from bidding for Greater Anglia and First Group's subsequent takeover of GB Railways, one of the three companies shortlisted for the franchise, were unconnected. "I cannot decide who may or may not get on a bidding shortlist based on what may happen in the mergers and acquisitions market," he said.

However, Mr Bowker said the SRA had been aware that a train operator which was unsuccessful in getting on the Greater Anglia franchise might decide to bid for another company that had made it.

Mr Bowker, who has given his formal consent to First Group's purchase of GB Railways, added that safeguards had been put in place to ensure that the other two bidders for Greater Anglia, National Express and Arriva, would not be disadvantaged.

First Group's takeover of GB Railways values the company at a minimum of 250p a share. It will pay an additional 200p if GB Railways wins the Greater Anglia franchise and a further 50p depending on the outcome of bids for the new Northern and Wales & Borders franchises, where GB Railways has also been shortlisted.

Separately, Mr Bowker disclosed that he earned a total of £353,000 last year, including a bonus of £42,000 - 80 per cent of his maximum entitlement. In the previous year, he donated his £13,500 bonus to the Railway Children charity but he said he had not yet decided what to do with this year's.

The SRA's annual report shows that the cost of running the regulator rose 11 per cent last year to £50m after an 8 per cent rise in staff numbers. But Mr Bowker said its workload had risen by close to 50 per cent. The SRA made a loss of £768m for the year and a loss of £545m including Network Rail, which now forms part of its accounts.

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