Stagecoach in London bus opeation [1300 buses] were sold today to Macquarie Bank of Australia for GBP263.5m .
Stagecoach will realise a net of GBP120m after payment to pension funds and debts.
The price is not high- the earning multiple is 6.7 [120/17.9- which is the pretax op profits for Stagecoach in London]
This is subjected to regulatory approval, and will not be completed for 3 months. current management to continue.
Macquire Bank is a well known 'raider' specialising in buying udervalued assets, and sell them later on for profit.
at the moment they are bidding for a port in the UK and PCCW in HK.
The London Bus operation is controlled by TfL [Transport for London], and London Buses 'own' the routes. they put the route operation to tender to bus companies for a contract lasting between 5-7 years. bus companies are not free to set fares or change scheduled. the contract price is fixed for 5 years.
fuel prices have gone up quite a lot, and it caught many operators by surprise. as fuel costs are a third of the operating costs, the profitability of London bus operations have gone down.
This is true for all bus operators in London- not just stagecoach.
Outside of London, the bus operation is quite different, and bus companies can have more freedom . but in London, there is heavy public subsidy for bus operation that increased the number of buses here to well over 6200, while outside of London, overall the number of buses in use is declining every year.
