Arriva's future?

[markcf83]

DB are in early stage talks with potential bidders to dispose of Arriva Group:
https://www.reuters.com/markets/deals/firstgroup-i-squared-weigh-competing-bids-arriva-sources-2023-04-20/

Reuters report that the sale of Arriva is expected to be confirmed by the end of the month at the latest,if not earlier.

[winston]

Reuters report that the sale of Arriva is expected to be confirmed by the end of the month at the latest,if not earlier.

The deal has been signed today:
https://www.reuters.com/markets/deals/deutsche-bahn-i-squared-capital-sign-agreement-sale-arriva-group-2023-10-19/

[hlliwmai]

The deal has been signed today:
https://www.reuters.com/markets/deals/deutsche-bahn-i-squared-capital-sign-agreement-sale-arriva-group-2023-10-19/

So what does this actually mean? I assume Arriva will stay as it is and I assume there won't be any name changes etc and all subsidiaries will remain the same?

[Justin Tyme]

So what does this actually mean? I assume Arriva will stay as it is and I assume there won't be any name changes etc and all subsidiaries will remain the same?

Arriva the business is changing hands, so there don't need to be any name changes - although it will of course be up to the new owners to decide whether to change anything in the short term.

Stagecoach and Go Ahead have all changed hands in the past year, and have not made any name changes yet.

The big question, I think, is whether the change will be good for Arriva.  Hopefully the new owners will take a careful look at the business and, having invested in it, make decisions that demonstrate that Arriva does want to operate buses ...

[Stu]

So what does this actually mean? I assume Arriva will stay as it is and I assume there won't be any name changes etc and all subsidiaries will remain the same?

It's just an acquisition by a hedge fund / investment capital company.

Arriva is already a well-known and established 'brand', I don't envisage any major wholesale changes, it will simply be 'business as usual' for now.

The big question, I think, is whether the change will be good for Arriva.  Hopefully the new owners will take a careful look at the business and, having invested in it, make decisions that demonstrate that Arriva does want to operate buses ...

One thing is for certain, these kinds of hedge fund companies only acquire these businesses if their investors can get some kind of return.

There's little detail on their website (strange) but all it does say is:

I Squared Capital is an independent global infrastructure investment manager focusing on energy, utilities, telecom and transport in the Americas, Europe and Asia.

Perhaps they've got one eye on future opportunities that more bus franchising will bring...

[Budgie]

Be interesting to see if anything is announced about the interim, whilst the takeover is going through. Arriva have sold their operations in other countries and I-squared are used to doing these deals so the lawyers might not need too long to complete the sale.  However, DB surely aren't going to invest in any new buses other than those already on order and I-squared can't be ordering buses either in case the sale falls through. Plus a mention of them buying electric buses presents the infrastructure challenges Arriva had and NX are seeing. So it might be a fair way into the future before any new buses are ordered, let alone delivered. Given the age profile of Arriva's fleet and their recent fleet withdrawal policies, I struggle to see how all the Depots can keep on running as now whilst waiting for new orders. I would argue in the Midlands, Aylesbury (especially given events in September 23), Tamworth, Shrewsbury and Telford are very vulnerable. Potentially depends on the size of existing orders DB has placed, that are part of the deal.

All in all though, a very positive announcement.

[Tony]

Be interesting to see if anything is announced about the interim, whilst the takeover is going through. Arriva have sold their operations in other countries and I-squared are used to doing these deals so the lawyers might not need too long to complete the sale.  However, DB surely aren't going to invest in any new buses other than those already on order and I-squared can't be ordering buses either in case the sale falls through. Plus a mention of them buying electric buses presents the infrastructure challenges Arriva had and NX are seeing. So it might be a fair way into the future before any new buses are ordered, let alone delivered. Given the age profile of Arriva's fleet and their recent fleet withdrawal policies, I struggle to see how all the Depots can keep on running as now whilst waiting for new orders. I would argue in the Midlands, Aylesbury (especially given events in September 23), Tamworth, Shrewsbury and Telford are very vulnerable. Potentially depends on the size of existing orders DB has placed, that are part of the deal.

All in all though, a very positive announcement.

If you know new stuff is on the way you can keep anything running in the interim as NX are doing with 20 year old Tridents & Geminis at the moment

[Vulcan]

Be interesting to see if anything is announced about the interim, whilst the takeover is going through. Arriva have sold their operations in other countries and I-squared are used to doing these deals so the lawyers might not need too long to complete the sale.  However, DB surely aren't going to invest in any new buses other than those already on order and I-squared can't be ordering buses either in case the sale falls through. Plus a mention of them buying electric buses presents the infrastructure challenges Arriva had and NX are seeing. So it might be a fair way into the future before any new buses are ordered, let alone delivered. Given the age profile of Arriva's fleet and their recent fleet withdrawal policies, I struggle to see how all the Depots can keep on running as now whilst waiting for new orders. I would argue in the Midlands, Aylesbury (especially given events in September 23), Tamworth, Shrewsbury and Telford are very vulnerable. Potentially depends on the size of existing orders DB has placed, that are part of the deal.

All in all though, a very positive announcement.

What is the event at Aylesbury on Sept 23  that you refer please ? 

[Stu]

One thing is for certain, these kinds of hedge fund companies only acquire these businesses if their investors can get some kind of return.

Following up on this after reading the Reuters press release...

The sale is expected to complete in 2024, pending approval of Deutsche Bahn's supervisory board and the German transport ministry, they said in a statement.

They did not disclose the sale price. Reuters reported last week that the sale would value Arriva, which operates red London buses and train services in the UK, at around 1.6 billion euros ($1.69 billion) including debt, citing sources familiar with the deal.
I Squared's Managing Director Mohamed El Gazzar told Reuters on Thursday that his company plans to invest 2 billion euros in Arriva to grow and electrify its fleet. It would consider complementary and "synergistic" acquisitions in Arriva's key markets including the UK, Italy and the Czech Republic, he said, adding that it is open to both small or sizeable deals of more than 1 billion euros in value.

I keep forgetting that Arriva also has ownership of UK rail franchises such as CrossCountry and Chiltern Railways.

Any investors who also have stakes/shares in electric bus manufacturers will be delighted by this announcement of investment of 2bn euros.

It might not seem like it at the moment, but public bus transport is going to become 'good business' in the future, if Arriva's new owners are already considering acquisitions in 'key markets'.

I wouldn't be surprised if in the near future Arriva makes a bid to acquire the West Midlands Travel operations from Mobico.

[Danthebusman]

I wouldn't be surprised if in the near future Arriva makes a bid to acquire the West Midlands Travel operations from Mobico.

That would be huge, I'd be interested to see it unfold.

[winston]

I wouldn't be surprised if in the near future Arriva makes a bid to acquire the West Midlands Travel operations from Mobico.

WMT isn't the crown jewel it once was.

Although, I Squared Capital could potentially bid for the entire Mobico Group or even Rotala.

[Kevin_Brum12]

What is the event at Aylesbury on Sept 23  that you refer please ?

https://www.miltonkeynes.co.uk/news/transport/arriva-addresses-safety-concerns-about-overcrowded-school-bus-travelling-between-milton-keynes-and-aylesbury-4374546

Not good press for the Arriva operations in that part of the world and it is not an overnight job to rustle up additional drivers and reallocate double deck buses from elsewhere in the Arriva empire.  Aylesbury and Bucks is also I imagine a difficult place to recruit bus drivers.  So the new owners could offload.

I suspect they will be more interested in the city region/urban operations.

[Kevin_Brum12]

WMT isn't the crown jewel it once was.

Although, I Squared Capital could potentially bid for the entire Mobico Group or even Rotala.

Mobico I think will face a takeover and 1Squared Capital would be suitor.  However it they did they would have to dispose of NX Coaches to satisfy the competition authorities, owing to the Arriva ownership of Cross Country and Chiltern.

[ellspurs]

https://www.miltonkeynes.co.uk/news/transport/arriva-addresses-safety-concerns-about-overcrowded-school-bus-travelling-between-milton-keynes-and-aylesbury-4374546

Not good press for the Arriva operations in that part of the world and it is not an overnight job to rustle up additional drivers and reallocate double deck buses from elsewhere in the Arriva empire.  Aylesbury and Bucks is also I imagine a difficult place to recruit bus drivers.  So the new owners could offload.

I suspect they will be more interested in the city region/urban operations.

So the problem is that one (1) passenger was concerned that the poor children had to stand for their journey to school?

I assumed the incident was this part of the article:

On a recent journey an Arriva bus had to be evacuated due to a suspected suspension collapse.

Again, one (1) resident raised a concern about the suspension collapsing on one of the parts of the route where the bus is travelling faster. This is even spelt out in the subtitle of the (misleading) headline:  

One resident is concerned the extra passengers are affecting buses' suspension

How many suspension collapses have buses had in recent years? If the bus was operating at higher than their standing capacity then there would be a concern, but I'm sure that I've seen way more than 20 adults stood on a NX bus on its way into the City Centre in the morning. 

[j789]

WMT isn't the crown jewel it once was.

Although, I Squared Capital could potentially bid for the entire Mobico Group or even Rotala.

Why would they want Rotala? They apparently were/are losing money on all their West Midlands commercial services if their press releases are to be believed. And the areas they are dominant in like Preston, Redditch and Kidderminster are hardly fertile ground for significant future growth - there is a reason why the larger groups got rid of these operations! Perhaps if they had won any of the larger Greater Manchester contracts you'd have a point but I just do not see them as an attractive proposition for any of the larger companies as they would require significant investment in those areas without any guarantee in these uncertain times.

With the struggles of the bus industry in recent years, mergers are far more likely than takeovers anyway, less risk in the long run and no significant initial outlay having to purchase instead of merge.