A language school in Denmark, a car dealership in Slovenia, a bus company in Budapest – they always had striking examples ready for scoffers at the railway’s extensive foreign business. Critics have long been asking why money is available for such activities far away from the core business, while passengers at German train stations are increasingly annoyed by late trains. With the decision to sell the foreign subsidiary Arriva, this criticism has taken some of the wind out of its sails. However, the step does not mean an end to activities outside Germany.
“Deutsche Bahn’s strategic goal is to make record investments in environmentally friendly rail transport in its core German business,” said Chief Financial Officer Levin Holle on Thursday. “The signed purchase agreement therefore represents a strong approach.”
Arriva operates buses and trains in the UK and ten other European markets. The company owns some of the red double-decker buses in London. This also included said language schools, car dealerships and bus companies in other countries. According to media reports, Deutsche Bahn will now receive 1.6 billion euros for separating from these companies. The buyer of Arriva is the financial investor I Squared Capital, which specializes in infrastructure projects. There was no official information about the price.
In 2010, the railway had put around 2.7 billion euros on the table for Arriva, including debts. With Arriva, the railway is also shedding liabilities of around one billion euros as well as high upcoming investments in the company fleet.
The railway has been aiming for a sale for a long time. But there were hardly any interested parties. The corona pandemic in particular hit Arriva hard. The company has now recovered under new management. But because of the lack of investment for years, experts are talking about a restructuring case.
Just a few weeks ago, Deutsche Bahn announced the next phase in the sale of another prominent subsidiary: The board now wants to look for a buyer for the logistics group DB Schenker. Schenker is also extremely active abroad. But unlike Arriva, the economically well-performing logistics giant had significantly polished Deutsche Bahn’s recent balance sheets. Interest from investors is considered high. Above all, the railway wants to use the income to reduce its enormous mountain of debt of around 30 billion euros.
Arriva and Schenker represent a time in which the railway tried to become a global logistics and transport group, a “global player”, with billion-dollar acquisitions under railway boss Hartmut Mehdorn and his successor Rüdiger Grube. There was already criticism of this back then. When purchasing Arriva in 2010, Green Party politician Anton Hofreiter accused the railway management of “megalomania”.
But the group remains a global player even after the sale of Arriva. Car dealerships and language schools will then no longer be part of the portfolio. In the company’s own E.C.O. group, Deutsche Bahn continues to bundle consulting and development services as well as operations for numerous transport projects around the world. At the end of last year, the company landed an order worth billions in Egypt. The railway is to operate and maintain the first high-speed network there.
The railway has also been providing technical support for the Doha Metro in the desert state of Qatar for several years. The first line of the capital’s largely underground local transport system went into operation in 2019. The railway also provided advice on the restructuring of the port of Santos in Brazil.
Their involvement in the Mexican infrastructure project “Tren Maya” is particularly controversial. Starting in 2024, the train will cover a distance of around 1,500 kilometers, mostly on the Yucatán Peninsula, and will transport around three million tourists per year. Environmental groups and representatives of indigenous communities have filed lawsuits against the project – there are six UNESCO World Heritage Sites and five biosphere reserves in the region. During an attack on the railway infrastructure in Hamburg a few weeks ago, extremists also referred to this in a letter claiming responsibility.
In the first half of the year alone, the E.C.O. Group generated total sales of 3.1 billion euros from its foreign business, almost 12 percent more than in the first six months of the previous year. However, the division made operational losses and recorded a loss of 95 million euros before interest and taxes (EBIT). These figures are unlikely to convince critics of foreign business.
