Stagecoach forced to sell stake

BY RUSSELL HOTTEN

Stagecoach, whose rapid expansion has made it Britain's biggest bus company, has again been ordered to sell its investment in another operator because of monopoly worries.

Jonathan Evans, corporate affairs minister, has told the company to divest its 20 per cent stake in SBH, a Glasgow bus company, and give up its board seat.

Last month Mr Evans over-ruled a decision by the Monopolies and Mergers Commission and told Stagecoach to dispose of its 20 per cent holding in Mainline bus company in Yorkshire.

The MMC had ruled simply that Stagecoach should not increase its stake.

This latest move comes at a time of increasing concern about the rationalisation of the bus industry. Smaller operators are being bought or closed down in a savage price war in which the offer of free bus services to gain market share is common.

Stagecoach, which has been the subject of more than 20 Office of Fair Trading probes, bought the stake for £8m in December 1994. Richard Hannah, analyst at UBS, said Stagecoach would be able to sell its stake for at least that and would probably get a premium price.

The investment agreement included an undertaking for SBH to buy back the stake from Stagecoach for the sale price, plus an agreed level of interest should Stagecoach wish to sell. However Stagecoach was also at liberty to sell the stake to the highest bidder and other bus companies would undoubtedly be interested, Mr Hannah said.

The MMC decision was based on the argument that Stagecoach, with 10 per cent of the routes in Glasgow, was one of the main competitors to SBH.

Stagecoach was deemed to have compromised its effectiveness as a competitor by taking the stake. The MMC estimated that Stagecoach had in effect raised its market share in the area to 66 per cent.