Stagecoach buys Wigan bus business from FirstGroup for £12m

FirstGroup: Bus business sale to Stagecoach
FirstGroup: Bus business sale to Stagecoach
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TRANSPORT giant FirstGroup ploughed ahead with its £100 million asset disposal programme today by selling its bus business in Wigan to Stagecoach for £12m, raising eyebrows in the City.

The Aberdeen-based company unveiled plans in March to dispose of some of its bus services so that it could concentrate on “high-growth” areas.

FirstGroup’s aim was dealt a blow in July when Perth-based rival Stagecoach pulled out of a deal to buy some of its bus services in Devon following competition concerns.

A FirstGroup spokesman told The Scotsman there were no competition concerns with the sale in Wigan because there is not “the same degree of overlap”.

The Wigan deal involves 300 staff transferring from FirstGroup to join Stagecoachin the Greater Manchester area.

Under the deal, Sir Brian Souter’s firm is buying 120 vehicles, a bus depot and some leased premises in Wigan bus station.

But analysts questioned why FirstGroup is selling a business that returned an operating profit of £1.5m on revenues of £13.2m in the year to 31 March, delivering a 11.3 per cent margin.

Gerald Khoo, an analyst at Espirito Santo, said Wigan’s margin compared favourably with the overall 11.6 per cent for FirstGroup’s bus operations.

“This deal raises the risk that management is selling relatively good businesses in order to generate some momentum in its disposal programme,” he said.

“The most-important objective of the disposal programme [is] to reduce the number of under-performing units management needs to focus on. The disposal of the Wigan bus unit does not seem to advance this goal.”