Aug. 10 (Bloomberg) -- Deutsche Bahn AG is set to win European antitrust approval for its 1.6 billion-pound ($2.5 billion) purchase of Arriva Plc after offering to sell the U.K. company’s assets in Germany, according to two people with knowledge of the matter.
The offer would satisfy conditions imposed by the European Commission, which extended its probe of the transaction by two weeks and is scheduled to rule on the deal tomorrow, said the people, who asked not to be identified before an official decision. U.K. antitrust authorities also agreed to the proposal, said one of the people.
Deutsche Bahn is taking on French competitor Societe Nationale des Chemins de Fer with the acquisition, which will create a group with 16 billion euros ($21 billion) in annual sales and 10 million daily passengers, Chief Executive Officer Ruediger Grube said April 22. The state-owned company, based in Berlin, aims to expand outside of its home market, which in 2009 accounted for 68 percent of its revenue.
“You could argue that part of Deutsche Bahn’s objective was to take out a major and growing competitor on its home market, even if it meant selling it to a weaker party,” said Gerald Khoo, an analyst at Arbuthnot Securities in London. “The main goal was always to keep the non-German assets to increase its European footprint.”
Deutsche Bahn declined to comment, as did Ton van Lierop, a spokesman for the European Commission in Brussels, and Simon Craven, a spokesman for Sunderland, England-based Arriva.
Arriva was unchanged at 77 pence at the close of trading at 4:30 p.m. in London, valuing the company at 1.5 billion pounds. Arriva investors will receive 775 pence in cash for each share held under terms of the deal agreed in April.
Deutsche Bahn has had initial contact with as many as five potential buyers of Arriva’s German business, including Rethmann Gruppe, SNCF’s Keolis unit and BeNEX GmbH, a German train and bus operator, said a person familiar with the matter.
Deutsche Bahn may enter negotiations with the interested parties once the EU announces conditions for its approval, said the person. The German railway aims to complete the transaction by the end of August, as the de-listing of Arriva and its inclusion in Deutsche Bahn’s structure may take two more weeks, the person said.
Arriva’s German business was set up in 2004 and had sales of 417 million pounds in 2009, an increase of 14 percent from a year earlier. The unit employed 2,900 people and operated 216 trains and about 900 buses, according to its annual report.
Contracts won last year include one to run trains in Berlin and northeast Germany valued at 1 billion euros through 2022, making it the largest rail contract awarded in the country to a non state-owned company.
Arriva, which employs more than 42,000 people, gets 52 percent of its revenue from U.K. operations including London buses, Welsh trains and the CrossCountry rail franchise that operates the long-distance route from Cornwall to Scotland.
Deutsche Bahn already owns Britain’s biggest rail-freight business, together with Chiltern Trains, which provides passenger services from London to Birmingham, and has 50 percent stakes in Wrexham, Shropshire & Marylebone Railway and the London Overground commuter route.
Heike Nicolaisen, a spokeswoman for Rethmann Group, declined to comment. Keolis spokeswoman Eva Rouquie couldn’t immediately be reached for comment.
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