London red bus operator Arriva is to be snapped up by US infrastructure investor I Squared.

German owner Deutsche Bahn secured the sale, understood to be worth around 1.6 billion euros (£1.4 billion), after lengthy efforts to offload the firm to reduce its debt.

Sunderland-based Arriva is one of the UK’s largest train and bus operators, which includes the largest fleet of London’s famous red double-decker buses.

The company, which also runs the London Overground rail network and the Chiltern and CrossCountry rail franchises, employs around 34,000 people across 10 European countries.

The takeover deal is expected to complete next year, subject to “customary closing conditions and approvals”.

I Squared, which last year attempted to buy London-listed rival transport firm FirstGroup, committed to significant investment in Arriva following the deal.

Arriva Group chief executive Mike Cooper said: “This is a great opportunity for Arriva and the start of an important new chapter for our business.

“I know that the team at I Squared share our belief in providing sustainable transport services that cater for the needs of tomorrow, as well as the pressures of today.

“I Squared’s investment in our business will help to unlock new opportunities and create value for everyone who is important to Arriva – our people, the planet, and above all the passengers we are privileged to transport every day.”

The Rail, Maritime and Transport (RMT) union reacted angrily to the sale to I Squared, which it claims is registered in the Cayman Islands tax haven.

General secretary Mick Lynch said: “This sale of Arriva by German state railway to a tax haven-registered company underscores what a perverse and corrupt system rail privatisation is in this country.

“Our members have not had a pay rise in over three years despite huge profits and dividends generated for shareholders.

“And now we have the prospect of these ill-gotten gains ending up in a tax haven where there is even less scrutiny and even more wealth to be extracted from our railways.”