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Deutche Bahn considers sale or IPO of London Overground operator Arriva

Published: 12:16 28 Mar 2019 GMT

london overground
Deutche Bahn said a sale or listing would help lower its debt pile

Arriva, the operator of Northern rail and the London Overground, is to be put up for sale or floated by its German owner Deutsche Bahn.

Deutsche Bahn will explore a sale of up to 100% of its British-based transport business to one or several investors, or an initial public offering (IPO).

Deutsche Bahn under pressure to lower debt pile

The German railway operator said the sale or listing would help lower its debt pile and give Arriva more room for growth.

Arriva, which runs trains and rail services across Europe, was taken over by Deutsche Bahn in 2010.

But Deutsche Bahn has recently come under pressure to find a way to address its funding gap.

It spent €1bn in new high-speed trains last autumn, which drove up Deutsche Bahn’s debts close to €20bn.

Arriva employs 53,000 people in 14 European countries and generated sales of €5.44bn last year.  

The company’s biggest challenge has been Northern, which has been hit by strikes in a dispute over the role of guards on trains.

Political uncertainty could hurt valuation 

Deutsche Bahn had raised the idea of an IPO of Arriva in 2016 but shelved the plans after the UK voted to leave the European Union due to concerns the business would be undervalued and investors will be deterred by a weaker sterling.

However, there is still uncertainty surrounding Brexit and worries that UK railways could be re-nationalised if Labour wins the next general election, meaning Deutsche Bahn faces the same risks it did in 2016.

If Deutsche Bahn pursues an IPO, the valuation of Arriva could be as much as €4bn based on the valuation multiples of its peers.

If a sale is pursued, Deutsche Bahn could fetch €3.5-4bn for the sale of Arriva, according to a report by German business news magazine WirtschaftsWoche in October.

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