Arriva Sold to I Squared by DB

[Bletchleyite]

Hooray - a bit of sanity from @Tetchytyke

Whilst the business of "flipping" businesses (i.e. buying them, extracting value, and then selling them) is widespread in other sectors, infrastructure businesses are less so simply because the long-term nature and the requirement to invest makes it less attractive to carpet baggers. Instead, they look to get consistent, long-term returns.

I wouldn't call Arriva an infrastructure business. Network Rail is an example of that.

It's a load of wheeled shops selling transport - much more like a slightly esoteric form of retail.

That's not to say they will slash and burn of course, though there will be a choice to make - manage decline or invest for growth - as it really is a rather tatty business that's lost its way in most areas, unlike say First which appears to be signficantly cleaning up its former act. And with franchising becoming more popular, if it doesn't invest in growing that way, it'll likely just decline to nothingness as it loses its significantly sized operations in franchise areas like Merseyside and any others that may come up.

 

[Tetchytyke]

I wouldn't call Arriva an infrastructure business. Network Rail is an example of that.

I Squared is in the infrastructure sector. PE in that sector is there for a consistent 5% ROCE, they’re not there for carpetbagging.

You see the same in the ferry sector. Condor Ferries has been owned by PE for coming up 20 years- Macquarie and now Columbia Threadneedle.

== Doublepost prevention - post automatically merged: 17 Oct 2023 ==

I squared have clearly been after a U.K. transport firm for sometime.
They had a 1.2billion bid rejected for First group back in summer 2022.

They clearly see value in the market, especially if they can purchase at a heavy discount. They thought First would be available at a discount but it turns out it wasn’t. So now they’re trying with Arriva, which is sensible given how DB seem so desperate to sell.

 

[philthetube]

I wouldn't call Arriva an infrastructure business. Network Rail is an example of that.

It's a load of wheeled shops selling transport - much more like a slightly esoteric form of retail.

That's not to say they will slash and burn of course, though there will be a choice to make - manage decline or invest for growth - as it really is a rather tatty business that's lost its way in most areas, unlike say First which appears to be signficantly cleaning up its former act. And with franchising becoming more popular, if it doesn't invest in growing that way, it'll likely just decline to nothingness as it loses its significantly sized operations in franchise areas like Merseyside and any others that may come up.

Can't see them buying for managed decline, doing that they end up with nothing, breaking up and selling or investing, (hopefully investing), will be the way forward.

 

[WAB]

Hooray - a bit of sanity from @Tetchytyke

Whilst the business of "flipping" businesses (i.e. buying them, extracting value, and then selling them) is widespread in other sectors, infrastructure businesses are less so simply because the long-term nature and the requirement to invest makes it less attractive to carpet baggers. Instead, they look to get consistent, long-term returns.

As far as the UK goes, the value in Arriva's bus operations are the garages, the fleet, the established patronage, and the staff. On the rail side I doubt there is much that actually belongs to Arriva outside of Grand Central. It's not too difficult to extract the value.

I sincerely hope that iSquared pump some money in to catch up on fleet renewals, perhaps reintroduce Sapphire or similar, improve their website and customer service, and perhaps allow an easing of the relentless cutting of journeys.

On the railways, money for a longer term solution for Grand Central's fleet would do much to secure the service group's future.

 

[450.emu]

I hope it goes well, having worked for a company that got bought by one of these venture capital outfits, who then went and broke up the business into chunks to sell on, leading to redundancies. I would like to see them invest in Arriva, there's tons of Euro4 SB200 buses that will need replacing, and they need to get more hybrids and electrics in and fix up general presentation of their fleet. They do well with the Overground, even the Class 315s that preceeded the 710s were well presented despite their age.

I hear it will take some time to disentagle Arriva from DB, so it may still take months...

 

[MB1]

Confirmation this morning of the sale to I Squared Capital, with the deal expected to complete in 2024.

Press release from DB: https://www.deutschebahn.com/en/pre...reement-to-sell-Arriva-to-I-Squared-12354064#

 

[LNW-GW Joint]

Confirmation this morning of the sale to I Squared Capital, with the deal expected to complete in 2024.
Press release from DB: https://www.deutschebahn.com/en/pre...reement-to-sell-Arriva-to-I-Squared-12354064#

This seems to be the key paragraph:

Gautam Bhandari, Global CIO and Managing Partner of I Squared. “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 are excited to work with Arriva and we will invest to support its future growth as a major European bus and rail operator.”

Difficult to apply to DfT's rail contracts, but it does suggest Arriva will remain an integrated transport company and not be broken up for sale.
The DfT will have to approve the transfer of ownership of its rail contracts.
There will still be some European operations, so not solely trading in the UK.

 

[sh24]

I hope it goes well, having worked for a company that got bought by one of these venture capital outfits, who then went and broke up the business into chunks to sell on, leading to redundancies. I would like to see them invest in Arriva, there's tons of Euro4 SB200 buses that will need replacing, and they need to get more hybrids and electrics in and fix up general presentation of their fleet. They do well with the Overground, even the Class 315s that preceeded the 710s were well presented despite their age.

I hear it will take some time to disentagle Arriva from DB, so it may still take months...

There is a big difference between venture capital and private equity. VC funds have a 7 year timeline - 2 years to raise and deploy money, 3 years for their investments to make money, and then 2 years to exit those and return funds to their LP's. PE normally has a much longer timeline, and in the investment space that could be 10, 20 years or more. They are much more patient albeit also pretty hard task masters. But generally PE (which is what iSquared is) are much better stewards of a business. If they can see a return on improving GC's rolling stock then they will.

 

[class 9]

This seems to be the key paragraph:


Difficult to apply to DfT's rail contracts, but it does suggest Arriva will remain an integrated transport company and not be broken up for sale.
The DfT will have to approve the transfer of ownership of its rail contracts.
There will still be some European operations, so not solely trading in the UK.

Not sure whether the DfT will need approve anything, as the NRCs are with Arriva not DB and the contracts are in place.
I suspect that I Squared will leave the TOCs alone as they pose zero financial risk and deliver guaranteed returns, albeit very modest.

 

[LNW-GW Joint]

Not sure whether the DfT will need approve anything, as the NRCs are with Arriva not DB and the contracts are in place.
I suspect that I Squared will leave the TOCs alone as they pose zero financial risk and deliver guaranteed returns, albeit very modest.

It probably depends on who gives the Chiltern/XC/LO parent guarantees and bonds.
That's usually the owning group.
In the past the DfT has extracted extra "benefits" for passengers when TOCs change hands, but this might not happen with NRCs.

 

[Edvid]

The sale of Arriva Group to I Squared is now complete. Presser below.

Arriva Group looks to the future under new ownership

I Squared Capital closes acquisition with Deutsche Bahn for Arriva, one of Europe’s leading providers of passenger transportation; previously announced in October 2023. Deal marks significant moment in Arriva’s history; I Squared commits to provide significant long-term capital to support growth...

news.arriva.co.uk

03 Jun 2024

Arriva Group looks to the future under new ownership​

• I Squared Capital closes acquisition with Deutsche Bahn for Arriva, one of Europe’s leading providers of passenger transportation; previously announced in October 2023.
• Deal marks significant moment in Arriva’s history; I Squared commits to provide significant long-term capital to support growth and decarbonisation.

Monday June 3, 2024: Arriva Group (“Arriva”), a leading provider of passenger transport across Europe, is pleased to announce the completion of its acquisition by I Squared Capital (“I Squared”), a leading independent global infrastructure investment manager. The acquisition, first announced in October 2023, encompasses all of Arriva’s businesses across 11 countries.

Mike Cooper, Arriva Group CEO, welcomed the news and said: “Closing this transaction marks an important milestone and an exciting new chapter for Arriva. It is an opportunity for Arriva to recommit to working alongside passenger transport authorities to deliver essential transport links and build a more sustainable future for our colleagues, customers and the communities we serve. With the backing of I Squared, an independent and highly reputable infrastructure investor, I am confident that we will deliver on that commitment for the benefit of the millions that Arriva serves”.

Mohamed El Gazzar, Senior Partner at I Squared, said: “Passenger transport plays a vital role in society, connecting communities and facilitating economic growth, while reducing carbon emissions and congestion. Arriva plans to be at the heart of this agenda, working alongside its transport authorities and clients. Arriva’s ambition for the decarbonisation of its fleets also aligns with I Squared’s strategy to develop and scale assets with technologies that accelerate the energy transition.”

Enrico Del Prete, Fund Partner at I Squared, added: “Decarbonising public transport is one of the next big challenges in the energy transition and we are excited to work with Arriva to provide the support and investment that will help the company achieve its vision of cleaner cities and greener public transport networks. We see genuine growth potential that can be unlocked at Arriva over the long-term. We are excited for what comes next and look forward to working with the whole Arriva team as we capitalise on the opportunities in the sector together.”

Arriva Group and its operating companies have all transferred to I Squared as part of the deal, ensuring continuity of services across Arriva’s footprint, and reassurance for employees who will continue to serve communities without any changes to their employment conditions.

I Squared has extensive experience in providing essential infrastructure, including transport, logistics, energy, utilities, and digital infrastructure around the world. The company is a leading investor in transport and logistics and in decarbonisation technologies, with a track record of investing significant capital to create sustainable, long-term growth across its portfolio, supporting management teams in improving operational performance, and investing to support the energy transition.