Deutsche Bahn Weighs Reinstating Sale of Arriva Subsidiary

Deutsche Bahn AG is considering selling its Arriva transport business as it looks to focus on its core German railway operations, according to people familiar with the matter. The company is undergoing a broader overhaul and is looking to streamline its operations.

The German state-owned railroad operator is working with advisers to informally gauge interest from potential buyers, including investment funds and rival transport companies, the people said. It may seek a valuation of €1 billion to €2 billion in any deal, according to the people.

Arriva, based in Sunderland, England, operates bus and train services in Britain and several continental European countries, according to its website. In London, it operates some of the iconic red double-decker buses, as well as the London Overground network of suburban rail services and Chiltern Railways, which runs passenger trains between the UK capital and Birmingham.

Deutsche Bahn said last month that it would explore a sale of its DB Schenker logistics unit, and firms are currently pitching for sellside roles. A divestment could value that business at around €20 billion, Bloomberg News has reported. A sale of Arriva would help Deutsche Bahn streamline its operations and slash debt as it seeks to modernize its domestic railroad operations.

In 2010, Deutsche Bahn acquired Arriva for £1.6 billion ($2 billion). However, attempts to list or sell the unit failed in 2019, when bids came in well below book value. Since then, Arriva has trimmed its footprint by selling businesses in Denmark, Serbia and Poland to turnaround specialist Mutares SE.

There has been a lot of activity in the bus and train sector in the UK recently. Last year, DWS Infrastructure agreed to buy bus operator Stagecoach Group Plc, beating out National Express Group Plc.

In 2022, the Go-Ahead Group Plc, which operates London's commuter trains and iconic double-decker buses, was acquired by an investor group backed by the Australian transportation firm Kinetic Holding Co. This group beat out rival suitor Kelsian Group Ltd. for the company. FirstGroup Plc, another British bus and train operator, rejected a takeover approach from I Squared Capital.

Buyout firms including Carlyle Group Inc. and Apollo Global Management Inc. have previously pursued Arriva, which competes with companies including France’s Keolis. While Deutsche Bahn would prefer to exit Arriva before selling Schenker, there is no guarantee that the company will proceed with either transaction, according to sources.

A spokesperson for Deutsche Bahn declined to comment.