Arriva PLC

Admiral Way, Doxford Internation
Sunderland
SR3 3XP
United Kingdom
Telephone: +44 191 520 4000
Fax: 44 191 520 4001
Web site: http://www.arriva.co.uk

Public Company
Incorporated: 1938
Employees: 28,552
Sales: £1.53 billion ($3.25 billion) (2003)
Stock Exchanges: London
Ticker Symbol: ARI
NAIC: 485210 Interurban and Rural Bus Lines; 423110 Automobile and Other Motor Vehicle Merchant Wholesalers; 423120 Motor Vehicle Supplies and New Parts Merchant Wholesalers; 447110 Gasoline Stations with Convenience Stores; 485510 Charter Bus Industry; 522298 All Other Non-Depository Credit Intermediation; 531190 Lessors of Other Real Estate Property; 532111 Passenger Cars Rental; 532112 Passenger Cars Leasing; 551112 Offices of Other Holding Companies; 811111 General Automotive Repair

Arriva PLC is one of Europe's leading and fastest-growing publicly traded transportation companies. The Sunderland, England-based company is one of the United Kingdom's top three transportation groups, behind Stagecoach and Go-Ahead. Arriva's U.K. operations include the operation of more than 6,000 buses—the company is the leading bus operator in London, and also operates bus lines in the Northeast, Northwest, Midlands, Yorkshire, and Southeast of England, as well as in Wales and Scotland. Arriva is also a major operator of trains in England, conducting interurban, rural, and commuter passenger rail services in Wales, and in Liverpool and Manchester and throughout the north of England. The company also operates more than 235 railroad stations in the United Kingdom. Limited future growth in the United Kingdom has led Arriva to the European continent, where the privatization of the public transportation infrastructure was underway in the 2000s. Arriva is already a leading bus operator in The Netherlands, with some 20 percent of that country's regional market, and provides rail, taxi, and water bus services as well. In Denmark, Arriva became the first private (non-government-owned) company to receive a passenger rail contract in that country, providing service in the Mid- and North Jutland regions. Arriva's Scandinavian presence also includes bus services in Sweden. Elsewhere in Europe, the company provides bus services in Spain and Portugal, and is the leading private bus group in Italy. Arriva also operates a bus and coach leasing business. The company's corporate leasing arm oversees a fleet of some 11,000 cars and vans. Quoted on the London Stock Exchange, Arriva is led by Managing Director R.J Davies. In 2003, the company posted revenues of £1.53 billion ($3 billion).

Motorbikes in the 1930s

Tom Cowie started out his working life repairing and selling motorcycles for his father, also named Tom, in the backyard of the family's home through the 1920s and 1930s. In 1938, the senior Cowie opened his own shop selling used motorcycles. Tom Cowie was called up for military service soon after; returning from the army in 1946, Cowie used his £1,000 in savings to take over the family business and expand it. Over the next decade, Cowie's company emerged as a major U.K. motorcycle retailer.

Cowie prepared to expand the company still further at the end of the 1950s. In 1950, Cowie added a new automobile retailing operation, which quickly overtook the company's original motorcycle business in sales. Cowie quickly began expanding, adding new showrooms throughout its home region. From the beginning, however, Cowie's automobile sales leaned heavily toward the lease-to-own and corporate markets. That effort was supported by the company's public offering in 1965. In 1969, the company, known as T. Cowie, sold more than 42 percent of its stock to Mercantile Bank.

Cowie continued adding dealerships and showrooms through the 1970s, moving into the Midlands region. Cowie also built up a strong automobile financing business, called Red Dragon Securities. By the middle of that decade the company had raised its annual sales to more than £18 million. In 1977, the company became determined to expand beyond its core northern markets, and it launched a takeover attempt on Colemore Investments. That acquisition would have permitted the company to expand its dealer network into the southern regions of the United Kingdom, and also introduced Cowie to the European market with a number of Fiat dealerships. Yet the attempt was rejected by Colemore's shareholders.

Instead, Cowie began focusing on a different acquisition target. By 1980, the company had built up a 30 percent stake in the George Ewer group, which operated a number of automobile dealerships, and included franchises for makes such as Vauxhall, Ford, and British Leyland. The Ewer group had another significant holding—the Grey-Green fleet of motor coaches.

The bid for Ewer quickly turned hostile, however, after Cowie opposed Ewer's purchase of struggling farm machinery group Eastern Tractors. Cowie ultimately triumphed, succeeding in gaining more than 51 percent of Ewer's shares by the end of 1980. The acquisition added some £14 million to Cowie's annual sales, which topped £91 million by the end of the group's 1981 fiscal year. Cowie quickly restructured its new acquisition, shutting down Ewer's money-losing dealerships.

Cowie ultimately sold off the money-losing Eastern Tractors operation. More successful for the company was its financing business, which grew strongly into the mid-1980s, emerging as a major U.K. corporate fleet operator. The company considered spinning off that business as a separate, publicly listed entity, in part to improve the value of its own stock, but ultimately retained full control.

Public Transporter in the 1990s

In the early 1990s, Cowie's finance operation proved its primary profit driver, with margins as high as 10 percent, compared with just 2 percent from its motor dealerships. Cowie also expanded into a related area, that of vehicle rentals, including rentals of buses and motor coaches, in 1991.

Yet the company's bus operations pointed the way to its future as Arriva. The United Kingdom had been undergoing a vast privatization and deregulation program under the Thatcher government in the 1980s and early 1990s. As part of that process, the country became a pioneer in the privatization of its public transportation infrastructure, including its bus and rail networks.

Cowie began looking for new acquisition opportunities to boost its bus business in the early 1990s. In 1994, the company paid nearly £30 million to acquire Leaside Bus Company—previously operated by the London Regional Transport authority—adding routes in north and central London. Leaside's £43 million in revenues per year tripled Cowie's bus revenues.

Soon after the Leaside acquisition, Cowie spotted a fresh opportunity. In December 1994, the company agreed to pay £16.3 million to acquire South London Transport, also from the London Regional Transport authority. South London added a fleet of 400 buses and routes in Brixton, Norwood, Croydon, and Thornton Heath. The addition of South London established Cowie as the leading bus operator in the London area, with a market share of 18 percent.

Cowie leapt into the big leagues with the acquisition of the British Bus Group in 1996. Paying £282 million, Cowie took over the United Kingdom's third largest bus company, with some 12 percent of the U.K. market. The addition of British Bus boosted Cowie's total market share to more than 16.5 percent nationwide, with a fleet of more than 6,400 buses, and new markets including Yorkshire, Essex, Derbyshire, Northumbria, Scotland, and Wales.

The company's shifting direction led to conflict in the board-room and the ouster of founder Tom Cowie (by then Sir Tom Cowie) in 1997. Soon after Cowie's departure, the company announced its decision to change its name, uniting its different operations under the single Arriva banner. By the end of that year, Arriva had made its first purchase, paying £5 million for the Original London Sightseeing Tour and its fleet of 81 double-decker buses.

International Transport Leader in the New Century

The new name also pointed toward a new shift in the company's strategy. With future growth prospects in the United Kingdom limited by monopoly concerns, Arriva began eyeing the continental European markets. Under pressure from the European Union, these markets were expected to begin opening up their own transport networks to private competitors in the early 2000s.

Arriva made its first move into the larger European market with the purchase of Unibus, based in Denmark, in 1997. In 1998, Arriva entered The Netherlands, acquiring 75 percent of Vancom Nederland, part of U.S.-based ATC Vancom and then the largest private public transportation group in that country. The Vancom purchase gave Arriva control of routes in the Flevoland, Groningen, and Maastricht regions.

Arriva continued building its presence in The Netherlands, adding the Veonn & Hanze bus group in 1998. The company also entered rail services operations for the first time, starting in Groningen, and, in a joint venture, launching combined bus and train services in Friesland.

Company Perspectives:

With activities in eight different European countries, our vision is to be recognised as the leading transport services organisation in Europe. We are working to achieve our vision by growing the business through organic growth, acquisition, better service delivery, innovation and marketing.

Arriva announced its decision to sell off its car leasing business in 1999 as it moved toward becoming a specialty transport operator for the new century. The company continued targeting Europe, buying Bus Danmark for £13.7 million in 1999. The purchase boosted the company's share of the Danish market to 18 percent, and also gave it a foothold in the bus market in Sweden. In that year, also, the company bought two bus operators in the Galicia region in Spain. By 2000, the company had extended its Iberian presence with the purchase of four bus companies in Portugal, giving it routes in Famalicao, Guimaraes, and Braga.

The liberalization of the U.K. rail market brought Arriva's attention back home in 2000, when it launched its Arriva Trains Northern division in the north of England. The company further boosted its U.K. rail business with the 15-year contract to operate the passenger rail network in Wales in 2003. In a further extension of its rail operations, the company won the franchise to operate the Jutland-region passenger train service in Denmark.

By then, Arriva had gained a leading share in the Danish bus market, through its acquisition of Combus in 2001. The following year, Arriva boosted its Iberian operations with the purchase of Autocares Mallorca and the acquisition of majority control of Portugal's Transportes Sul do Tejo, a leading bus operator in the Lisbon area. In 2002, also, Arriva entered Italy, buying up SAB Autoservizi, the leading Italian bus operation in the Lombardy region.

As it shed its remaining noncore holdings, Arriva emerged as one of Europe's leading pure-play public transport operators. In 2004, the company established a beachhead in Germany, the largest single European market, with the purchase of Prignitzer Eisenbahn Gruppe. By the end of that year, the company had extended its German presence to the Bavarian region, with the acquisition of 76.9 percent of Regentalbahn AG. That purchase also gave Arriva operations extending into the Czech Republic. Arriva clearly had arrived as a leading European transport group for the new century.

Principal Subsidiaries

Arriva Bus & Coach Limited; Arriva Bus & Coach Rental (1) Limited; Arriva Bus & Coach Rental (2) Limited; Arriva Bus & Coach Rental (3) Limited; Arriva Bus & Coach Rental (4) Limited; Arriva Croydon & North Surrey Limited; Arriva Cymru Limited; Arriva Danmark A/S1 (Denmark); Arriva Derby Limited; Arriva Durham County Limited; Arriva East Herts & Essex Limited; Arriva Findiv Limited; Arriva Fox County Limited; Arriva International Limited; Arriva Kent & Sussex Limited; Arriva Kent Thameside Limited; Arriva London North East Limited; Arriva London North Limited; Arriva London South Limited; Arriva Manchester Limited; Arriva Merseyside Limited; Arriva Midlands North Limited; Arriva Motor Holdings Limited; Arriva Motor Retailing Limited; Arriva Noroeste SL2; Arriva North East Limited; Arriva North West Limited; Arriva Northumbria Limited; Arriva Passenger Services Limited; Arriva Personvervoer Nederland B.V.3 (Netherlands); Arriva Portugal – Transportes, LDA6; Arriva Scotland West Limited4; Arriva Sverige AB5 (Sweden); Arriva Tees & District Limited; Arriva Teesside Limited; Arriva The Shires Limited; Arriva Trains Limited; Arriva Trains Northern Limited; Arriva Trains Wales/Trenau Arriva Cymru Limited; Arriva Vehicle Rental Limited; Arriva Yorkshire Limited; Arriva Yorkshire West Limited; British Bus (Properties) Limited; British Bus Group Limited; London Pride Sightseeing Limited; Londonlinks Buses Limited; MTL Services Limited; SAB Autoservizi S.r.L.7; Stevensons of Uttoxeter Limited; The Original London Sightseeing Tour Limited; Transportes Sul do Tejo S.A.6.

Principal Competitors

FirstGroup PLC; Stagecoach Group PLC; Go-Ahead Group PLC; Azienda Trasporti Municipali; Keolis; Swebus AB; Nettbuss A.S.; Bus Eireann; Transports Verney.

Key Dates:

1938:

The Cowie family begins selling used motorcycles.

1946:

Tom Cowie takes over the family business.

1960:

Cowie launches sales of automobiles.

1965:

Cowie goes public on the London Stock Exchange.

1980:

The acquisition of George Ewer leads Cowie into the bus market, through Grey-Green bus lines.

1991:

Cowie launches an automotive rental business.

1994:

Cowie acquires the Leaside and South London bus companies, becoming a leader in the London market.

1996:

Cowie acquires British Bus, the third largest bus company in the United Kingdom.

1997:

The company changes its name to Arriva; the company acquires its first overseas bus operation, Unibus, in Denmark.

1998:

Arriva enters the Netherlands market through the acquisition of Vancom Nederland and Veonn & Hanze.

1999:

The company sells off its car leasing business to focus on the public transportation market; Bus Dan-mark is acquired; the company enters Spain.

2000:

The company launches U.K. rail operations and enters the Portuguese bus market.

2002:

The company begins operating a rail franchise in Denmark.

2003:

The company begins a 15-year contract to operate rail service in Wales.

2004:

The company acquires Prignitzer Eisenbahn Gruppe and Regentalbahn in Germany.

Further Reading

Canovan, Cherry, "Driving into Europe," Acquisitions Monthly, August 2002, p. 48.

"Cowie Group," Times, March 2, 1994, p. 27.

Davidson, Andrew, "Arriva Chief Says Drive into Europe Is Just the Ticket," Sunday Times, October 10, 2004, p. 13.

Emling, Shelley, "Arriva's Horizons," International Herald Tribune, April 3, 2004, p. 19.

Geary, Joanna, "Arriva Set to Expand After Strong Showing," Birmingham Post, December 18, 2004, p. 15.

Martin, P., The Tom Cowie Story, London: James and James, 1988.

Mason, John, "Expanding Arriva Ahead of Expectations," Financial Times, December 18, 2004, p. 3.

Richardson, Denise, Sir Tom Cowie: A True Entrepreneur, Sunderland: University of Sunderland Press, 2004.

Wright, Johanna, "Drivers Test Arriva's Danish Rail Adventure," Financial Times, January 2, 2004, p. 18.

—M. L. Cohen