Latest Rail News

06.05.16

DB set for part-sale of Arriva and Schenker rail arms

The Arriva and DB Schenker owner, the German-based Deutsche Bahn (DB), has pushed forward plans to sell off parts of its company in order to dodge mounting debt and allow for continued investment.

After a meeting of its Supervisory Board on Wednesday (4 May) in Berlin, decision-makers instructed the company’s management board to develop an implementation plan for third-party minority holding in Arriva and DB Schenker.

While a final decision on this is planned for autumn, DB is firm on its intention to “financially secure the largest quality and investment campaign in the company’s history”.

Professor Utz-Hellmuth Felcht, chairman of the Supervisory Board, said after the meeting: “If we don't take action, the group's debt will increase substantially by 2020.

“A third-party equity interest limits the level of debt and creates the financial scope necessary to continue the quality and investment campaign in Germany.”

The company’s board chairman, Dr Rüdiger Grube, added that DB’s “express intention” with this move is for Arriva, based in Sunderland, and for DB Schenker, the biggest freight operator in the UK, to “continue to be fully consolidated in DB’s balance sheet”.

But UK unions hit out at the foreign company’s decision, with the RMT, which has consistently argued against German ownership of national franchises, warning that a “fire-sale of a sizeable chunk of DB’s UK operations jacks up a new threat to jobs and services”.

It argued that the proposed sell-off of up to a 45% minority stake in Arriva and DB Schenker will cause British DB employers to “rapidly” see the company’s ownership status transformed in the next three years.

Its general secretary, Mick Cash, also took the opportunity to criticise the privatised franchising model, given that ownership and solvency of parent companies can change without unions, rail users or even the government franchising body “having any say in it”.

Cash also recently celebrated the decision to cut short DB’s seven-year Tyne & Wear Metro contract after Metro passengers were allegedly “let down” by its operator, DB Regio.

Arriva recently won the £1.5bn contract to run London Overground services from November this year, and started running the Northern franchise on 1 April.

(Image: c. Phil Noble)

Comments

Andrew Gwilt   06/05/2016 at 11:39

So Arriva and DB Schenker want to part sale. Would these 2 companies could be seperated or would they still be merged. What is part sale anyway? Because Arriva manages Crosscountry, Arriva Trains Wales, Chiltern Railways and soon to operate with TfL London Overground Ltd (LOROL).

Ian Dinmore   06/05/2016 at 11:56

Oh dear, given that UKIP now have a foothold in Wales, I wonder what the Welsh Assembly will make of the 'part sale' of Arriva?

Mikeb   06/05/2016 at 16:13

Indeed, what does "Part-Sale" actually amount to? Does it mean that Arriva and Schenker will be floated on either the London or Frankfurt Stock Exchange with DB retaining a majority shareholding? If so, it would give potential UK investors an opportunity to share in the profits of two successful German-owned rail transport companies.

Lutz   07/05/2016 at 08:41

The sale is likely to be a private equity sale - similar to the investment in Bombardier - an off-market placement. DB is trying to reduce it's debt load, but unless it can engineer something like an investment from another German state body, it is going find that any takers will drive a hard bargain with contractual commitments to improve the returns on the business - i.e. end of the empire build phase. The other side of the coin is that if the sale does not go ahead DB and all it's operating companies will have to undergo significant cost reductions.

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