TALKS about buying a large stake in a major French bus and rail company, potentially creating a European transport giant, have been held by North-East-based Arriva.

The Sunderland-based transport group confirmed yesterday that it had held preliminary discussions about Keolis with public sector French rail operator SNCF, which owns about 45 per cent of the company.

Keolis is France’s largest private sector transport group and a full-scale merger between the two companies would create one of the continent’s largest operations in the sector with revenues of almost £6bn.

French newspaper La Tribune unveiled the possible deal yesterday.

In a statement to the London Stock exchange yesterday Arriva said: “The Company confirms that it has held very preliminary discussions with SNCF regarding a possible contribution of all or part of Keolis’ transportation business to Arriva to create a significantly- enhanced and leading European transportation business focused on the increasing liberalisation of the transportation market in Europe.

“The board affirms that discussions are at a preliminary exploratory stage and there is no certainty that any agreement will be reached.”

Keolis operates trams, buses and airport services in seven European countries, including the UK, and looks after 1.8 billion passengers a year.

The company, employing 40,000 staff, also has operations in Algeria, Australia and Canada.

In the UK it is a minority shareholder in the Govia joint venture with Go-Ahead, which operates the Southern, Southeastern and London Midland rail franchises.

A merger would throw down the gauntlet to the UK’s biggest transport firm, First- Group, which had revenues of £6.2bn in the year to March 31.

For 2008, Arriva posted revenues of £3bn, with Keolis delivering turnover of 3.2bn euros (£2.8bn).

Of this, 56 per cent of sales were in France, with the remainder from its international operations.

In France, Keolis operates 80 urban bus networks, including a fleet of 5,000 buses and more than 15,000 employees, as well as nearly 200km of light rail such as metro and tram services.

The tie-up would also be a good fit for Arriva’s mainland European division, which reported £1.4bn in revenues for 2008, but lacks a significant presence in France to match its operations in other major European countries and Scandinavia.

Arriva, which is the third largest bus operator in the UK, has annual revenues of £3bn and about 43,000 employees.