BUS and rail firm Arriva has agreed a £1.59bn takeover by German operator Deutsche Bahn to create a new pan-European transport giant.

The move combines the UK’s second biggest bus firm and the operator of Welsh and CrossCountry rail services with a business which carries 5m train passengers a day in Germany.

Deutsche Bahn already has a presence in the UK – running services such as the Chiltern Railways route between London and Birmingham Snow Hill – and owns the company which runs the Royal Train.

Deutsche Bahn was founded in 1994 as a successor to the German national railway.

It is still 100% state-owned, but run for profit by its management and operates in more than 130 countries.

The group operates 34,000 kilometres of rail network in Germany, but also wants to build on Arriva’s international arm, which operates in 11 mainland European countries.

The combined business would carry about 10m passengers a day – making it the largest carrier in Europe.

The two businesses generated combined revenues of more than £28bn during 2009, with £25.4bn from Deutsche Bahn and £3.1bn from Arriva.

Deutsche Bahn chief executive Rudiger Grube said that the Arriva brand was “very, very valuable” and would be kept outside Germany. The company will also maintain Arriva’s current headquarters in Sunderland.

Mr Grube added that job losses were unlikely as a result of the move. He said: “This is a merger for growth, sustainability and profitability, so I hope we will create workforce rather than reduce workforce.”

The company is confident of getting the deal approved by European competition authorities, although some of Arriva’s German business will have to be sold.