National Express Group PLC ("National Express") has reached an in principle agreement for Trenitalia, the passenger rail transportation company part of FS Italiane Group, to acquire the c2c franchise.
Completion of the acquisition is conditional upon final consent from the Department for Transport and is expected to occur within the next three to four weeks. The total consideration is expected to be in the region of £70 million, resulting in a small net profit for National Express.
Following initial partnership discussions regarding future franchise bidding, Trenitalia UK made an offer that National Express’ board believes represents the best, and a fair, deal for its shareholders. National Express is immensely proud of its record at c2c, where under its tenure services have been transformed to become consistently the UK’s best performing rail operation. While not ruling out participating in future UK rail contracts, National Express has seen significant growth in North America and continental Europe in recent years. National Express believes there are further opportunities for growth in these markets.
The high-quality services and operations run by c2c make an excellent fit with Trenitalia’s customer-centric approach. Trenitalia has decided to invest in UK rail on the basis of the market’s fundamental strength and potential for growth, particularly in light of the Secretary of State for Transport’s recently announced vision for reform.
The acquisition is the first step in Trenitalia’s plans to expand in the UK rail passenger market, in line with the internationalisation plans of the entire FS Italiane Group. In December 2015, Trenitalia became the first new entrant to be awarded a “PQQ Passport” by the Department for Transport and since then is pursuing a number of franchise opportunities including beyond today’s deal.
Trenitalia will retain c2c’s existing management and staff and build on its successful track record of delivering value for passengers. In addition to delivering the existing plans for the franchise, Trenitalia has also committed to invest for further improvements for all c2c’s customers based on innovative technologies at the heart of its strategy for the franchise globally.
Under National Express, the c2c franchise has been transformed with National Express introducing more services, new trains and recently pioneering new customer service standards. In February 2016, c2c became the first rail franchise in the UK to introduce automatic compensation for registered smartcard customers for any delay over 2 minutes without the need to complete claim forms. c2c was also the first rail service to offer flexi-season tickets.
Dean Finch, CEO of National Express Group, said: “National Express has been immensely proud of c2c’s transformation on our watch. From converting c2c into the UK’s consistently best performing franchise, we have also recently pioneered customer service standards with automatic delay compensation and flexi-season tickets, for example. While this has, therefore, not been an easy decision, the board believes the transfer of c2c to Trenitalia UK presents opportunities for all concerned.
“We have been impressed by the commitment and interest shown by Trenitalia and are grateful for the support shown by DfT in this process. Trenitalia has significant rail credentials and is excited by the opportunity to invest in the new agenda set out by the Secretary of State. For National Express, while not ruling out participating in future UK rail bids, this allows us to pursue further growth opportunities in the markets where we have seen strong returns in the recent years.”
Barbara Morgante, CEO of Trenitalia, said: “We see significant chances to invest in UK Rail and this in principle agreement with National Express allows us to foster these ambitions. This is why we are extremely delighted to have this exciting opportunity to run the UK’s consistently best performing railway and serve the people of East London and South Essex. We will work closely with customers and local stakeholders to apply our vision and deliver improvements that will be visible and valuable; we are confident that British customers will benefit from our skill and capabilities developed in the highly competitive Italian market.
“We are also closely monitoring the Railways Franchising Programme as we intend to participate in tenders issued by the DfT to strengthen our presence in UK.”