Abellio management buy-out

[Trainbike46]

It seems NS is getting out of the UK:

Key rail and bus services to return to UK-ownership​

Abellio UK and Nederlandse Spoorwegen announce management buyout.​

A new UK-run transport company is set to operate four of the country’s rail passenger services and over 50 London bus routes by the end of this year.
A management buyout from the state-owned rail company, Nederlandse Spoorwegen will pave the way for a new UK-based company to take over all Abellio UK’s existing services, serving millions of rail and bus passengers in London, Liverpool, the Midlands and East Anglia. The new company will be called Transport UK Group Limited.
Led by Managing Director Dominic Booth, who has decades of experience running public transport services in the UK, this deal has been widely welcomed by industry partners and experts. Completion of the buyout deal is subject to formal approval from partners including the Department for Transport, Transport for London and Merseytravel as well as regulatory consent from the Office for Rail and Road.
After 20 years in the UK Nederlandse Spoorwegen has decided to withdraw from the UK market to focus on domestic service provision within, and international railway services to and from, the Netherlands.
Mr Booth said today:
“I’ve been a railwayman all my life. I am thrilled to have the opportunity to return key public transport services back into UK ownership at a time when some of our competitors look destined for overseas ownership. We expect the business to transfer by the end of the year, following which we will focus all our energies and expertise on continuing to deliver the best possible services for our passengers, investing in our train and bus routes, and helping to develop a future ready, low emission UK transport network.
“Our wish to buy the company from Nederlandse Spoorwegen demonstrates our confidence in the existing Abellio UK team, both in our Head Office and on the ground. It’s the dedication of our 15,000 employees, together with a continuity of management, that will ensure our new company is a great success.
“We are grateful for the support and backing that we have received from Nederlandse Spoorwegen to date, and we look forward to continuing to work closely with them to manage this process to a successful conclusion.”
Bert Groenewegen, acting CEO of Nederlandse Spoorwegen, which will continue to support the new company during a transition period, said today:
“After a successful 20 years in the UK passenger transport market, NS is proud to support this natural next step for Abellio UK as it transitions with our blessing into a new management owned passenger transport group.”
Abellio UK is responsible for running four of the UK’s rail passenger services – East Midlands, West Midlands, Greater Anglia and Merseyrail - as well as being the fastest growing operator in the London bus network. The emergence of a new UK transport group reflects the management team’s confidence in the long-term prospects for the UK transport sector and its support for the Williams-Shapps review for Great British Railways which it has been helping to shape and implement.
Mr Booth added:
“This deal will put us in a strong position to continue the smooth operating of our current routes as well as giving us the capability to grow the business and bid for new franchises in the future. Beyond that, we are, and will continue to be, thought leaders in our sector determined to play a long-term and vital role in future of UK transport.”

Key rail and bus services to return to UK-ownership | Abellio

www.abellio.com

What do people think? As Abellio germany has already gone, that effectively means the end of NS-owned services outside the Netherlands

 

[SCDR_WMR]

What a shame it's not someone buying our Abellio

 

[Bletchleyite]

Interesting question is if it'll be successful. Often these schemes (think Yellow Buses) are because a group has sensibly decided it's a basket case but managers think otherwise.

 

[Trainbike46]

What a shame it's not someone buying our Abellio

which Abellio is that?

 

[Clarence Yard]

The question is who is backing Dominic Booth to do this? He won’t have ponied up the money to buy it all on his own.

 

[Trainbike46]

Interesting question is if it'll be successful. Often these schemes (think Yellow Buses) are because a group has sensibly decided it's a basket case but managers think otherwise.

Potentially some Dutch politics are in play here; at various points Dutch government ministers have made statements that they feel NS should not do anything they consider to be outside NS "core business", with various things including buses in the Netherlands and some station shops in the Netherlands having been sold off before. Abellio germany was obviously the bankruptcy case, but Abellio UK was relatively succesful up to covid, right? I recall a bunch of annual reports from NS that reported overall NS group profits that were lower than the profits from just Abellio UK, but then again the changes to UK railway structure (ie GBR) might be considered too risky

 

[pdeaves]

It's an interesting turn of events that it's going to a management buyout [1] rather than sold to another 'group'.

[1] subject to regulatory approval, of course.

 

[Haywain]

The question is who is backing Dominic Booth to do this? He won’t have ponied up the money to buy it all on his own.

It's not as if there's a prospect of huge profits anymore, is it? The government is taking all the financial risk (and any reward, however unlikely).

 

[Taunton]

"Management Buyout" will be the front. The management won't have the money in their bank accounts to buy the ownership, so it becomes with borrowed money, which is readily available provided all the chips are pointed in their direction, but by definition means none are pointed towards the users and/or staff, and are commonly known in the finance world as Vulture Funds. They commonly charge the rescued business (which is what this is) huge management fees which drain off all the surplus cash, along with other techniques.

 

[Haywain]

It's an interesting turn of events that it's going to a management buyout [1] rather than sold to another 'group'.

In the unlikely event of any other 'group' being remotely interested.

 

[Clarence Yard]

It's not as if there's a prospect of huge profits anymore, is it? The government is taking all the financial risk (and any reward, however unlikely).

Those management and performance fees are worth having, especially as they cannot be negative. Now you are not on the hook for revenue or authorised costs, it should all be relatively simple.

 

[Bletchleyite]

In the unlikely event of any other 'group' being remotely interested.

Yes, it could turn out there's little to buy. NRCs you can bid for yourself or London bus contracts you can, er, bid for yourself?

 

[Trainbike46]

Yes, it could turn out there's little to buy. NRCs you can bid for yourself or London bus contracts you can, er, bid for yourself?

Presumably the bus division owns some assets at least (buses & bus depot(s))?

 

[newtownmgr]

Abellio finally realising Grant Shapps is an idiot i suspect!

 

[Goldfish62]

Presumably the bus division owns some assets at least (buses & bus depot(s))?

Yes, they own their depots (except possibly Walworth may be owned by TfL?) and their preference is to buy rather than lease buses.

 

[A0]

In the unlikely event of any other 'group' being remotely interested.

NX having lost the merger with Stagecoach ?

 

[Randomer]

I agree with other posters that this probably has much more to do with politics in the Netherlands around business activities NS have been doing outside of core functions. I remember some articles in the press in the Netherlands with political rumblings over the losses Abellio were making when they had the Scotrail franchise back in 2018-2019. I don't want to start the whole debate about this again but I would suggest that this might have more to do with the buy-out than anything else. Especially when the Pandemic caused further losses and Abellio weren't kept on with a management contract. I do wonder if the bought out Abellio actually intends to stay in rail franchising at all or whether it will concentrate on bus contracts.

Article from back in 2017 about NS having to bail out Abellio

Abellio, an arm of the state-owned Dutch railway operator Nederlandse Spoorwegen (NS), took over the ScotRail franchise in April 2015 and made profits of £9.5 million in the first nine months.

However the latest accounts show in 2016 the business was loaned £10 million from Abellio Transport Holding, another branch of NS.
The 2015 figures had sparked accusations of Abellio "profiteering" from the franchise, but the accounts show no dividend was paid to its Netherlands-based parent company in either year.
Abellio ScotRail said its turnover of £610.1 million for the year was affected by tough trading conditions and the impact of the partial closure of Glasgow Queen Street station for 20 weeks.
The company faced heavy criticism after the reliability and punctuality of trains fell below the standard required of the franchise but said performance had now improved year on year for six periods in a row.

It highlighted investment of £475 million in the railways, the introduction of a new fleet of Hitachi built electric class 385 trains and the "extensive" refurbishment of high speed trains to serve Scotland's cities from 2018.
A spokesman for Abellio ScotRail said: "We're investing nearly half a billion pounds building the best railway Scotland has ever had, as part of our delivery of a highly specified Scottish Government contract.
"In doing so, we will deliver more seats and faster journey times for passengers, significantly improving customer service standards.
"We are making good progress with the recent independent National Rail Passenger Survey revealing that nine out of ten customers are satisfied with ScotRail - equalling our best ever score.
"ScotRail is also the best performing large operator in the UK.
"However, it is not surprising that the challenges of last year have had a negative impact on our financial performance and we are disappointed to be recording a loss.

"As with previous years, and despite reports to the contrary, there will be no dividend paid to our parent company in the Netherlands."

Also I would suggest the political appetite for NS to have significant financial risk overseas just isn't there anymore for the Dutch government. If they hadn't restructured they were looking at millions of euros a year in liabilities for an extended period. As suggested by this article(translated version below):

The NS subsidiary suffered major losses in Germany. Abellio therefore embarked on a major restructuring earlier this year, led by a court-appointed agent. This intervention was intended to prevent NS as a shareholder from having to support the subsidiary with millions of euros for years to come. Negotiations were therefore underway with clients in the four regions where the German branch of Abellio was active in order to reach new agreements. They had to make the service profitable again.

Without restructuring, the NS subsidiary in Germany threatened to lose 30 million to 50 million euros annually, Minister of Finance Wopke Hoekstra wrote in a letter to parliament last summer. This is partly due to increased personnel costs and fines that the company had to pay. The transport company received these monetary penalties because it was unable to meet performance agreements.

 

[dk1]

Just found out from the regional news & I work for them Always quite liked Dominic Booth.

 

[3141]

Ah, so Nederlandse Spoorwegen no longer wants the subsidy from British rail users that some allege it and other foreign owners of TOCs receive.

 

[fgwrich]

Ah, so Nederlandse Spoorwegen no longer wants the subsidy from British rail users that some allege it and other foreign owners of TOCs receive.

That argument always amuses me, particularly after the ScotRail fiasco as mentioned by @Randomer above. In other words, the Dutch Taxpayers have had enough of bailing us out! Similarly DB often gets mentioned in their arguments too - why is DB So good and cheap in Germany, we fund it etc, they go rather quiet when I mention DB Has tried to flog Arriva almost since they bought it for being the basket case it is.

 

[Goldfish62]

That argument always amuses me, particularly after the ScotRail fiasco as mentioned by @Randomer above. In other words, the Dutch Taxpayers have had enough of bailing us out! Similarly DB often gets mentioned in their arguments too - why is DB So good and cheap in Germany, we fund it etc, they go rather quiet when I mention DB Has tried to flog Arriva almost since they bought it for being the basket case it is.

And it is usually comes from people who have never travelled on DB. They may have a different opinion if they did.

 

[Randomer]

That argument always amuses me, particularly after the ScotRail fiasco as mentioned by @Randomer above. In other words, the Dutch Taxpayers have had enough of bailing us out! Similarly DB often gets mentioned in their arguments too - why is DB So good and cheap in Germany, we fund it etc, they go rather quiet when I mention DB Has tried to flog Arriva almost since they bought it for being the basket case it is.

I'm not sure if the losses in the case of the Scotrail franchise were really that bad, even without COVID changing predictions they had a defined relatively short end date. Its notable I haven't been able to find any mentions of further payments from NS (or other bits of Abellio) after the £10m they were reported to of paid, I've not started looking at the published accounts though. Perhaps the UK bus businesses ended up cross-subsidising the gamble they took with Scotrail.

Personally having thought on this some more I'm leaning towards this being much more about the problems Abellio ended up having in Germany causing a big change in risk appetite rather than anything that happened here. The potential liabilities for NS were much larger. The management buy-out being a product of this change of thinking rather than having to do with Scotrail directly.

 

[450.emu]

Yes, they own their depots (except possibly Walworth may be owned by TfL?) and their preference is to buy rather than lease buses.

So many changes to the London bus scene, last week CT Plus went under and Stagecoach are taking over. There was talk of the new business resurrecting the Travel London brand they had in the NatEx days. Abellio do well with their buses in London, and have just invested well in Greater Anglia.

Their new Southall bus depot has just opened, seems odd seeing the amount of investment then sudden retreat. I read elsewhere that NS will oversee and support the new business in its transition period, not sure if that is also financially.

I think the majority of franchise names will disappear under the GBR brand / livery and most may be operators with regional concessions, like how TfL have Arriva run the Overground, but with Overground branding, livery etc.

 

[Bald Rick]

The losses on Anglia were substantial - and rather more than Scotrail.

 

[Energy]

The losses on Anglia were substantial - and rather more than Scotrail.

Some figures from 2018. Its fair to say that the DfT makes a lot more money than the owners, other countries have cheaper tickets because the government subsidises half the fairs meanwhile over here its used for government income...

 

[Bald Rick]

Some figures from 2018. Its fair to say that the DfT makes a lot more money than the owners, other countries have cheaper tickets because the government subsidises half the fairs meanwhile over here its used for government income...

To be fair, the Dutch Government were effectively subsidising the fares over here…

 

[38Cto15E]

Will this buy out affect EMR in any way?
TIA

 

[newtownmgr]

Will this buy out affect EMR in any way?
TIA

If it’s abellio which it is then yes!

 

[InTheEastMids]

Will this buy out affect EMR in any way?

If it’s abellio which it is then yes!

Yes, and also no, because the new owners of EMR will inherit all of the contractual obligations as part of the buy-out.
So passengers at least should see no real change.

If the new TOC model is basically a fixed fee arrangement without revenue risk, and therefore very stable in terms of cash generation for its owners, then that's the kind of investment that's of interest to institutional investors and pension funds, so they may be putting up some of the cash, or may be the target buyer for a management exit in a couple of years time.

 

[newtownmgr]

Yes, and also no, because the new owners of EMR will inherit all of the contractual obligations as part of the buy-out.
So passengers at least should see no real change.

If the new TOC model is basically a fixed fee arrangement without revenue risk, and therefore very stable in terms of cash generation for its owners, then that's the kind of investment that's of interest to institutional investors and pension funds, so they may be putting up some of the cash, or may be the target buyer for a management exit in a couple of years time.

Yes as in involved in the buyout the same as other abellio owned TOC’s. As regards changes i expect the only thing anyone will see for a long time is the abellio branding removed. As employees we’ve been told nothing, which is no surprise to any of us really!