Arriva confirms talks with Deutsche Bahn

The firm, responding to speculation about the 1.5 billion deal, said it was in "advanced discussion" with state-owned Deutsche Bahn.

Arriva said its suitor has indicated that it is willing to make a cash offer of 775p per share, with Arriva investors also entitled to receive a final dividend for last year worth 18.8p a share.

Deutsche Bahn's proposal is subject to a due diligence review, unanimous recommendation by the Arriva board and approval by its boards and the German Ministries of Transportation, Finance and Economic Affairs.

The German company – which already operates UK services such as the Chiltern Railways route between London and Birmingham Snow Hill – first confirmed interest in Arriva last month.

Arriva, which is the UK's third biggest transport firm, has also attracted takeover interest from France's SNCF earlier this year as European operators look to consolidate to take advantage of deregulated transport markets.

A statement from Arriva yesterday said: "The board of Arriva notes the recent press reports about its discussion with Deutsche Bahn and the recent movement in its share price and confirms that it is in advanced discussion with Deutsche Bahn about the terms of a possible recommended cash offer."

Shares in the firm rose 3.3 per cent to close at 760.5p.

Arriva runs two rail franchises in the UK including CrossCountry, which covers 1,400 miles and calls at more than 100 stations between Aberdeen and Penzance, Bournemouth and Manchester and Cardiff and Stansted.

It also runs bus services in cities including Glasgow, Leeds, Leicester, Liverpool and Newcastle as well as operating services in 12 European countries.

Deutsche Bahn is involved in the running of the open access operator Wrexham, Shropshire and Marylebone Railway and is joint operator of the London Overground service.

It also bought the EWS freight company – which runs the Royal Train – in 2007, rebranding it DB Schenker.