Arriva investors tells D.Bahn offer more

LONDON (Reuters) - Two top ten shareholders in Arriva Plc (ARI.L) said suitor Deutsche Bahn AG DBN.UL should offer considerably more than Arriva's current share price to reflect the strategic value of the transport group.

Deutsche Bahn revealed the preliminary takeover approach earlier this week, after market talk of a 700-pence-a-share bid, but neither it nor Arriva disclosed an offer price.

Arriva shares closed at 706p a share on Friday, giving the company a market capitalisation of about 1.41 billion pounds.

"We think (Arriva) is worth much more than what is on offer at the moment. Even with the recent rise in share price, we think it's undervalued," one top-10 investor told Reuters. "We are really very keen for the two companies to keep talking -- keep negotiations going.

"The bus market in Europe is due for consolidation so this is strategically the right thing to be doing," this investor added.

The other top-10 shareholder said Arriva's operations, across 12 European countries, had "very big" potential as Europe's bus market liberalises over the coming decade.

"There is tremendous value to be had with Arriva because of the opportunities it has, and I think any potential suitor will have to pay a very attractive price," this investor said.

"Shareholders like us won't be willing to sell unless there's a significant premium on offer."

Arriva Chief Executive David Martin believes Europe's bus and rail market is worth more than 200 billion pounds in revenues.

However, suitors may question how much of a takeover premium is already factored into the stock.

Arriva shares have leapt about 50 percent since late January, when news of talks with Keolis, a unit of French state railway group SNCF SNCF.UL, first leaked. The talks, about an equity tie-up, ended in early March.

Earlier on Friday, Standard & Poor's said a takeover would "marginally increase" Deutsche Bahn's business and financial risk, but held its rating steady. S&P gives the railway operator an AA rating, just two steps from the top of the credit rating scale.

(Editing by Will Waterman)