Arriva shares soar as it confirms foreign takeover bid

London bus operator Arriva could fall under foreign ownership after it confirmed today that it had received an unsolicited takeover bid, thought to be from German giant Deutsche Bahn or Singapore's ComfortDelGro.

Shares in the company sped 18% higher to 682p after analysts put the bid at 700p a share, valuing the transport firm, which runs a European network of buses and trains, at £1.4 billion.

Arriva refused to name its bidder to the Stock Exchange, but analysts identified ComfortDelGro, which runs the Metroline bus franchise in London, and Deutsche Bahn as the likely suitors.

The German firm owns the Chiltern Line commuter route between London and Birmingham and is in talks with Eurotunnel about running high-speed trains through the Channel tunnel to link London and Frankfurt.

Last month Arriva walked away from merger talks with Keolis, owned by French state rail operator SNCF.

Arriva has been aggressively spreading its tracks across Europe, where its order book grew by 30% last year, and was looking at forming a new transport giant with Keolis, which mainly operates regional trains and buses in France.

The City has been alive with rumours of Arriva being up for sale since the talks collapsed.

Gert Zonneveld, transport analyst at Panmure Gordon, said Arriva's European network was attractive to bidders and warned that the London bus arm could become a sacrificial lamb if a deal with ComfortDelGro went ahead.

Together the two firms would control more than a third of the capital's bus routes, attracting the interest of competition regulators.

Zonneveld said: "That could bring a potential conflict of interest to a ComfortDelGro bid for Arriva, but Arriva's business in the capital only represents a third of its UK bus business.

"It's the firm's major pan-European business that is attracting the interest — there's a lot of mileage in its long-term growth prospects. If necessary, the company could dispose of its London bus operations."

Arriva — which also runs The Original Tour sightseeing buses and Cross Country rail franchise — saw its pre-tax profits plunge by a fifth last year to £121.7 million as it was hit by falling passenger numbers and higher fuel costs.