USA Stagecoach Group subsidiaries are to acquire selected businesses and assets from Coach America, Inc.
Coach America is a major operator of bus and coach services in the United States and has been operating under Chapter 11 bankruptcy protection since January 2012. The transaction is subject to the approval of the United States Bankruptcy Court of Delaware which is overseeing the Chapter 11 process. The Court’s approval is expected by 22 May 2012.
Stagecoach has agreed to acquire:
- Certain businesses and related assets and liabilities, for a cash consideration of US$134.2m (approximately £85m) and;
- at the option of the sellers, up to 85 further coaches for a cash consideration of up to US$25.6m (approximately £16m).
Some US$16.0m of the consideration has already been paid as a refundable deposit, with the balance being due on or around the completion of the transaction. The consideration payable will be potentially adjusted based on the working capital balances of the businesses to be acquired.
In addition requiring Court approval, the transaction is subject to meeting conditions, including regulatory approvals which could be completed within three months.
In the year ended 31 December 31 and applying Stagecoach accounting policies, the businesses to be acquired for US$134.2m generated estimated revenue of US$164.4m, EBITDA of US$24.6m and operating profit of US$13.3m, after taking account of estimated central overheads. The estimated gross assets of the businesses are US$92m.
Acquisitions include contract, line-run, charter and sightseeing operations at an attractive price and to acquire vehicles as part of its capital expenditure programme.
Coach America operations in Texas and California will provide depot infrastructure to enable Stagecoach to expand its megabus. com budget coach network more efficiently, more quickly and under its full control, while avoiding the need to pay a sub-contract profit margin in these locations.
Coach America’s Atlanta business is the existing sub-contractor of the megabus.com Atlanta hub and its business is among those to be acquired.
The nine businesses being acquired are located in:
- San Antonio and Dallas, Texas
- Sacramento, California
- Anaheim, California
- Atlanta, Georgia
- Cleveland, Ohio
- Gillette, Wyoming
- Elko, Nevada
- Hanover, Maryland
- Portland, Oregon
The transaction is being financed from available, undrawn, committed bank facilities.
Stagecoach Chief Executive, Sir Brian Souter, said: “Our North American division is the fastest growing part of the Group and this transaction will allow us to acquire selected businesses and vehicles at attractive prices in markets and regions we know well. They will benefit from our management expertise and ability to invest for growth.
“We see significant potential to roll-out megabus.com’s successful package of low fares and high quality service to new locations in the US. Texas and California in particular will give us an extended geographic footprint to accelerate our growth strategy for the brand, which already covers around 80 key locations in North America.”