Takeover deal for bus and rail firm

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

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

A spokesman for Arriva, which employs about 1,000 people in its Yorkshire bus operation, said it was a cash offer that was subject to approval from the company's shareholders. The spokesman stressed it was "business as usual" for Arriva's services.

Deutsche Bahn was founded in 1994 as a successor to the German national railway. It is still 100 per cent state-owned but run for profit by its management and operates in more than 130 countries.

It wants to build on the platform of Arriva's international arm, which operates in 11 European countries.

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."