3rd UPDATE: Arriva In Merger Talks With Keolis
January 28 2010 - 11:49AM
Dow Jones News
U.K. bus and rail operator Arriva PLC (ARI.LN) Thursday said
it's in preliminary talks with state-owned Societe Nationale des
Chemins de fer Francais, or SNCF, about a possible takeover of
France's public transport operator Keolis.
Arriva said talks are at an exploratory stage and cautioned
there is no certainty an agreement will be reached.
The talks with SNCF center on the "possible contribution of all
or part of Keolis' transportation business to Arriva to create a
significantly enhanced and leading European transportation business
focused on the increasing liberalization of the transportation
market in Europe."
Keolis is owned by French insurer Axa SA (AXA), through Axa
Private Equity and the Caisse depot et placement du Quebec, which
have a 52% stake. SNCF has a 45.5% interest with key Keolis
managers holding the remaining 2.5%.
SNCF wasn't immediately available for comment and Axa didn't
return calls. Keolis didn't respond to emails or calls.
Keolis is a minority partner with Go-Ahead Group PLC (GOG.LN) in
Govia, which runs Southern, Southeastern and London Midland rail
franchises in the U.K. It also operates the TransPennine Express
rail franchise in partnership with FirstGroup PLC (FGP.LN).
In 2008, Keolis carried some two billion passengers and recorded
revenue of EUR3.3 billion. It employs some 36,000 people across 11
countries. About 44% of its business is outside France.
In comparison, Arriva posted a revenue of GBP3 billion for 2008
and employs 44,000 people across 12 European countries.
Only last year, Keolis was pipped at the post by Veolia
Environment SA (VE) to merge its Veolia Transport unit with public
transport group Transdev, in which French state-owned investment
business Caisse des Depots et Consignations was selling its 70%
stake.
"Deutsche Bahn's attempted IPO in 2008 really made SNCF think
about its own international ambitions, and general belief has been
that it has lagged its German peer on this front and needs to play
catch-up, fast," said Olivetree Securities analyst Mark Kelly.
"Realistically, the U.K.-listed bus and rail stocks are the only
materially sized businesses listed anywhere in the world, and with
their own recent international expansions they provide SNCF with a
tailor-made bolt-on prospect.
"This isn't a story about synergies, it's about building SNCF's
international presence and Arriva brings that nicely. Arriva's
shareholder base is very open, free float is virtually 100% and the
top 15 shareholders--all institutions--own close to 75% of the
equity and its assets are very complimentary to that of Keolis, the
vehicle used by SNCF."
At 1551 GMT, Arriva's shares traded up 16 pence, or 3.5%, while
the FTSE 250 Index traded flat. The shares have gained 7.9% in
value in the past 12 months. The company has a market
capitalization of GBP964 million.
-By Kaveri Niththyananthan, Dow Jones Newswires; 4420 7842 9299;
kaveri.niththyananthan@dowjones.com
(Matthew Curtin in Paris contributed to this article.)
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