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Arriva agrees to £1.6bn Deutsche Bahn takeover

The UK bus and rail firm Arriva has agreed to a £1.6bn takeover by German operator Deutsche Bahn.

Germany's biggest state-owned railway company confirmed it will buy Britain's Arriva, creating a new European transport giant.

Deutsche Bahn will pay 775p per share in cash for the Sunderland-based company, whose board has accepted the offer. Shareholders will also be entitled to a final dividend of 18.8 pence per share.

Deutsche Bahn's chief executive Rudiger Grube said the Arriva brand would function as the international business arm for Deutsche Bahn.

Shareholders and the European Commission must approve the deal, which puts the combined annual revenue of the companies at around £16bn. Some of Arriva's German business will have to be sold, as per EU rules.

Deutsche Bahn is 100 per cent owned by the German state and runs the national rail services, employing 255,000 people in 130 countries. It already owns Chiltern Railways in Britain and had revenues of €29.3bn in 2009.

Arriva, operator of the CrossCountry and Wales train franchises, runs rail and bus services in 12 European countries, including Arriva Trains Wales in the UK, and handles around 2.5 million passengers a day.