Stagecoach pulls out of deal to buy First routes after OFT move

By PERRY GOURLEY
Published on 11/07/2012 00:00

SCOTTISH transport groups Stagecoach and FirstGroup yesterday voiced their dismay at a decision by the Office of Fair Trading (OFT) to refer a deal worth just £2.8 million to the Competition Commission.

An hour-and-a-half after the OFT announced the move over the sale of FirstGroup operations in north Devon, bidder Stagecoach said it was withdrawing from the deal.

“We do not believe we can justify spending further money and management time on what has already been a lengthy process,” a spokesman for Stagecoach said. He added the company was “extremely disappointed” at the OFT’s referral given the relatively small scale of the deal which involved 30 vehicles operating on ten routes in north Devon and a depot facility in Barnstaple. The OFT said its decision was due to concerns the merger will reduce competition in local bus services in the area. FirstGroup, which is looking to raise around £100m from the sale of parts of its bus operations to focus on higher-growth areas, warned that the decision may lead to services being withdrawn and puts jobs at risk at the north Devon operation which employs around 100 people.

Giles Fearnley, managing director of First’s UK bus division, said: “We are now considering our options and will consult fully with affected employees and stakeholders about the implications of the OFT’s announcement.”

But the company believes the OFT move will not signal wider problems for its disposal programme and that circumstances in the north Devon business were unusual as Stagecoach was the only bidder and there is significant overlap between operations of the two companies in the area.

Fearnley said he was confident of “future successful transactions” in the coming months.

Shares in FirstGroup closed down 7.1p at 204.4p while Stagecoach closed up 1.9p at 273.3p.