Deutsche Bahn (DB), Germany’s national rail provider, has agreed to sell its international subsidiary Arriva Group to US-based infrastructure asset management company I Squared Capital.

Arriva operates bus and train services in ten markets across Europe, with the UK as its primary business location. The business was British until it was acquired by DB in 2010.

Although financial information was not revealed by DB, market experts said the sale is likely to value Arriva Group at $1.68bn.

The deal must be approved by DB’s board and Germany’s Federal Transport Ministry. It is expected to be completed in early 2024.

The sale forms part of DB’s “Strong Rail Group” strategy to bolster domestic rail offerings by cutting down on the company’s international interests and investments.

Deutsche Bahn CFO Levin Holle explained the strategy further: “The strategic goal of Deutsche Bahn is to make record-level investments in environmentally friendly rail in our core business, combined with the massive increase of investment of the German Federal Government into our German rail infrastructure.

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“The purchase agreement signed is therefore in the spirit of Strong Rail. At the same time, the sale to I Squared will give Arriva new options to support its growth potential, for example for the future electrification of European fleets. For us, the agreed sale is an important step to focus even more on additional growth in rail transport in Germany.”

The company already off-loaded Arriva’s “non-core market” businesses, including Arriva Sweden and Portugal, Arriva Serbia, Denmark and Poland (Bus). 

I Squared executives said the purchase was agreed based on Arriva’s ongoing net zero strategy. 

Gautam Bhandari, managing partner at I Squared said: “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.”

Arriva Group CEO Mike Cooper added: “This transaction marks an exciting next stage for us and will deliver significant benefits for our colleagues, our passengers and the many passenger transport authorities we partner with across Europe, enabling us to play our role in delivering a better future.

“I Squared has an established track record of supporting companies which provide essential services and of investing in the energy transition. We are delighted that they have committed to provide Arriva with long-term capital for investment in innovation across our services, our assets, and our people.”