Germany’s Deutsche Bahn Eyes Amsterdam for Arriva’s IPO

(Bloomberg) -- Deutsche Bahn AG, Germany's state-owned railway operator, chose Amsterdam as the potential listing venue of its U.K.-based transport unit Arriva to tap higher growth in continental Europe, according to people familiar with the matter.

Deutsche Bahn recently filed a prospectus with the Dutch regulator for an initial public offering, said the people, who asked not to be identified because discussions are private. Deutsche Bahn is preparing the IPO as an alternative if a sale process, which kicks off this week with first-round bids, doesn't achieve a high enough valuation, they said.

The choice of the Euronext Amsterdam exchange reflects Arriva's faster growth in continental Europe, which now accounts for more than half of its profit compared with a minority when Deutsche Bahn acquired it for 1.6 billion pounds ($1.9 billion) in 2010.

A representative for Deutsche Bahn declined to comment.

Arriva, which employs around 53,000 people in 14 European countries, has benefited from acquisitions and higher demand for bus and rail from Hungary in the east and Spain in the south. That has helped offset challenges for its U.K. rail business, which faces a political and client backlash, as well as uncertainties amid negotiations for the U.K. to exit the European Union.

In the three years since Brexit, Amsterdam and other European exchanges have seen deal volumes rise by about 10%, while the number of deals in the U.K. have fallen by about a fifth. The exchange is now gearing up to host the international assets of Naspers Ltd. after the successful listing of meat processing machinery maker Marel HF in June.

Deutsche Bahn announced plans in March to sell Arriva to help pay off debt amid rising pressure to invest in infrastructure and trains in Germany. The company is seeking to divest for a profit compared to its book value of about 2.2 billion euros ($2.5 billion), the people said.

Arriva has drawn initial interest from both rival transport companies as well as infrastructure and private equity firms ahead of initial bids this week, the people said. Deutsche Bahn aims to get a general sense of whether to pursue a trade sale or IPO by mid-September, when the board meets for an update on the process, the people said.

While the company, which is being advised by Citigroup Inc. and Deutsche Bank AG, would prefer a sale of the whole business at an attractive valuation, they said.

Deutsche Bahn could aim to sell as much as a majority stake on the Dutch stock exchange as early as the fourth quarter and then sell down the rest over time, they said.

--With assistance from Swetha Gopinath and Myriam Balezou.

To contact the reporter on this story: Aaron Kirchfeld in London at akirchfeld@bloomberg.net

To contact the editors responsible for this story: Daniel Hauck at dhauck1@bloomberg.net, Matthew Monks, Liana Baker

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