Arriva sold to I Squared

January 2024 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

January 2024 Issue

Three years after it was initially put up for sale by its owner Deutsche Bahn (DB), Arriva has been sold to private equity (PE) firm I Squared Capital.

Although financial terms have not been disclosed, the deal is believed to be worth around €1.6bn including debt. It is expected to complete in 2024, subject to customary closing conditions, including the approval of the DB supervisory board and the Federal Ministry for Digital and Transport of the Federal Republic of Germany.

DB – which has been described as being in a state of “permanent crisis” by Germany’s national audit office – is believed to have made a loss on the sale, having paid €2.7bn for Arriva in 2010. DB put Arriva up for sale in 2019 to reduce its own debts, which stood at €28.8bn at the end of 2022.

According to DB, the sale of Arriva is part of its ‘strong rail group’ strategy to focus resources on its core domestic business and enable additional growth in rail transport in Germany. Arriva’s rail portfolio includes its UK trains and Netherlands businesses, as well as regional operating contracts in the Czech Republic that form part of its mainland Europe business.

Arriva employs around 35,500 people and transports 1.5 billion passengers each year across 10 European countries. Earlier in 2023, DB completed the sale of Arriva businesses in non-core markets, including Sweden, Portugal, Serbia, Denmark and bus operations in Poland. The Arriva brand will be retained after the transaction completes.

Miami-based I Squared, an infrastructure investor, has committed €2bn to expand and electrify Arriva’s fleet after its takeover, with a significant portion of those funds expected to be spent on its UK operations. I Squared has a track record of successful investments in infrastructure companies – from energy solutions companies such as Aggreko, through to transport and logistics services companies including TIP Group. The firm has over $37bn of assets in North America, Europe, Asia and Latin America.

“Arriva has good prospects for sustainable growth as market liberalisation in Europe progresses,” said Levin Holle, chief financial officer of DB. “The strategic goal of DB is to make record-level investments in environmentally-friendly rail in our core business, combined with the massive increase of investment by the German federal government in our German rail infrastructure. The purchase agreement signed today is therefore in the spirit of Strong Rail. At the same time, the sale to I Squared will give Arriva new options to support its growth potential.”

“Transport accounts for around one-fifth of global CO2 emissions,” said Gautam Bhandari, global chief information officer and managing partner of I Squared. “Three-quarters of this is from road transport, and a greener public transport sector is critical to the shift to lower-carbon infrastructure. Arriva’s strategy for net-zero operations and the decarbonisation of its fleet aligns with our strategy to develop and scale assets with technologies that accelerate the energy transition, as well as providing cleaner air in cities and towns by investing in green public transport.”

“We want to see a future where people choose to leave their car at home, a future with less traffic congestion and cleaner air,” said Mike Cooper, chief executive of Arriva Group. “This transaction marks an exciting next stage for us, and will deliver significant benefits for our colleagues, our passengers and the many passenger transport authorities we partner with across Europe, enabling us to play our role in delivering a better future. I Squared has an established track record of supporting companies which provide essential services, and of investing in the energy transition. We are delighted that they have committed to provide Arriva with long-term capital for investment in innovation across our services, our assets, and our people.”

Richard Summerfield