Stagecoach snaps up London bus operations in £20 million swoop

Stagecoach, the Scottish transport operator that looks set to be taken over, has agreed a £20 million deal to buy Kelsian Group’s east London bus operations, which run a fleet of 150 vehicles.

The group said it has “entered into binding agreements” to purchase the operations, which also include a depot at Lea Interchange, for an initial £10m followed by £1m each year for ten years after the move is completed.

Kelsian’s east London operation operates 11 contracts on behalf of Transport for London (TfL), using a fleet of about 150 buses, with an annual turnover of some £38m.

Perth-headquartered Stagecoach said the move was “a good strategic fit” alongside its existing London operations.

It added that the new depot would also provide the business with a platform to bid for fresh contracts in the area.

The group expects its net debt to increase by some £20m upon completion of the deal.

It added: “The acquired contracts have an acceptable expiry profile and there are opportunities to improve operational performance and grow contract margins as routes are retendered.”

Chief executive Martin Griffiths told investors: “We have an extensive track record of operating high-quality and profitable bus services on behalf of Transport for London.

Perth-headquartered Stagecoach has grown over the past 40-odd years to become one of the biggest bus operators in the UK.

“This targeted acquisition provides operational and margin improvement opportunities that we have successfully delivered at our other London bus depots.

“We look forward to working with TfL to deliver even better bus links to local communities in east London and also helping support the Mayor's drive to deliver a net zero transport system.”

The move comes as Stagecoach looks set for a £595m takeover by German investment fund DWS.

The transport group’s board backed the move in favour of a rival merger deal from coach operator National Express.

Last week, National Express confirmed it will not raise its bid for Stagecoach and maintained it believed the move is “superior” to DWS’s offer.

Earlier this year, Stagecoach pointed to a recovery in demand since the easing of Covid restrictions in January.

In a trading update, the firm also welcomed pledges of recovery funding for bus services from governments on both sides of the Border.

The firm has grown to become one of the biggest operators of bus routes across the UK, having started out with a skeleton service in 1980.

Stagecoach said in March: “We are pleased to see a recovery in demand since the easing of Covid-19 restrictions in January. Prior to the recent period of poor weather, overall journeys for our regional business during the first half of February ranged between 70 per cent and 78 per cent of pre-Covid levels on a rolling seven-day average.

“Looking beyond April, we expect further recovery in demand for our services, although we also see continuing forecasting uncertainty in relation to passenger demand, payments from government to support the continuation of regional bus services during that recovery phase, and cost inflation.”

Griffiths added: “We continue to see a positive long-term outlook for public transport, which is key to economic recovery, levelling up communities and helping secure the country’s net zero ambitions.”