Deutsche Bahn buys Arriva in 'first of many such deals'

London bus operator Arriva was today swallowed up by Germany's Deutsche Bahn in a £1.59 billion takeover that looks as if it will trigger a wave of consolidation within the European transport industry.

Deutsche Bahn will pay Arriva investors 775p a share, after the British group pushed its suitor higher than the 700p price analysts named as the bid offer in March. Arriva shareholders will also receive last year's proposed final dividend of 18.8p in May.

The deal means the German company will run a fifth of London's buses as well as The Original Tour sightseeing buses and the Cross Country rail franchise. It already owns the Chiltern Line commuter route between London and Birmingham and is joint operator of the London Overground service.

Arriva has 44,000 employees in 12 countries and Deutsche Bahn said the merger was aimed at growth, not cutting costs. It is expected to retain Arriva's Sunderland headquarters and run all of passenger bus and train services outside Germany under the Arriva brand.

Dr Rüdiger Grube, Deutsche Bahn's chief executive, said the expanded group would have annual sales of 16 billion (£13.9 billion) and transport 10 million passengers a day.

"Arriva's activities will strengthen Deutsche Bahn's strategic positioning in Europe, principally through Arriva's successful targeting of Europe's increasingly liberalised and fast-growing transport markets."

He predicted the takeover would kick off a host of dealmaking that would leave Europe's transport market dominated by a few big firms. "We intend to be the drivers and not the driven," he said.

Today Arriva's chairman Sir Richard Broadbent claimed the takeover "fully reflects the value of the business". Shareholders will now be asked to approve the deal, which is expected to complete in early July.

Union leaders expressed their concern at the deal. Bob Crow, general secretary of the Rail Maritime and Transport union, said: "This is a huge step in the wrong direction for rail workers and passengers and should sound a warning that we are heading towards a dangerous monopoly of rail and bus services across Europe in which profit comes ahead of safety and service."

Arriva was advised by Deutsche Bank and Rothschild, and Deutsche Bahn hired Lazard as its adviser.