Stagecoach backs out of First depot talks

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Stagecoach has walked away from talks with FirstGroup about taking over London bus assets which have reportedly been on sale for months, according to The Scotsman.

It is understood the two groups could not agree on a price after FirstGroup invited “expressions of interest” for the assets late last year.

The depots thought to be up for sale are Dagenham, Northumberland Park and Leigh in east London. Stagecoach was understood to have interest in Dagenham. This would mesh with Stagecoach’s other bus operations in the area, which include Barking, Bow, Leyton, Romford, West Ham and Catford.

“The two companies’ valuations of the assets were way apart, so it was not a runner,” one source close to the talks said.

As reported in CBW at the time, FirstGroup admitted in its January trading update that net cash would reach just £100m to £115m in the financial year to the end of March, compared with a previous forecast of up to £150m, due to fewer disposals of non-core assets than planned. FirstGroup also said at the time that lower multiples were being offered by would-be buyers, and has since said it is in no hurry to sell.

No announcement on a pruning of the London bus operation, which is being handled by Ernst & Young, is expected before the annual results announcement in the spring.

Analysts said Stagecoach may also have been put off by recent public advice from the Competition Commission to the Office of Fair Trading to scrutinise bus deals.

Stagecoach currently has a 15% share of the London market, while FirstGroup is the fifth-biggest player with 13%. The market leaders are Go-Ahead with 21% and Arriva with 20%.

Stagecoach sold its London operations in June 2006, citing pressure on margins from the regulated market, getting a price of £263.6m from Macquarie Bank. It bought East London Bus Group in 2010, albeit for £52.8m.