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Stagecoach rolls into U.S.
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June 14, 1999: 8:11 a.m. ET
U.K. bus operator paying $1.87B to buy Coach U.S.A., first step in U.S. market
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LONDON (CNNfn) - Stagecoach, one of Europe's leading transport groups, has agreed to a $1.87 billion takeover of U.S. bus operator Coach U.S.A.
The U.K.-based train and bus operator said it will pay $42 per share for the Houston-based bus operator, valuing the company at $1.24 billion. Stagecoach also will assume $638 million in net debt.
Stagecoach, a highly acquisitive Perth, Scotland-based group, has taken out a $2.25 billion loan facility to finance the acquisition. The company said it intended to refinance at least $1 billion of that debt by issuing bonds or equity-related securities.
Coach U.S.A. is a major player in the fragmented $20 billion U.S. bus market, providing charter and sightseeing services as well as operating scheduled commuter routes and airport shuttle services. Last year the group reported net earnings of $53.8 million on revenue of $803.6 million.
Coach, like Stagecoach, has grown rapidly through acquisition but needed a big backer to continue its growth. "I believe that in Stagecoach we have identified the ideal partner who can provide the financial flexibility and resources to support our next growth phase," Larry King, chairman and chief executive officer of Coach, said.
For Stagecoach, the acquisition gives the company a good foothold in the U.S. bus market. "I am delighted that we are entering the North American market at an early stage in its consolidation," Stagecoach Chairman Brian Souter said.
And analysts believe this is only the start of the U.K. company's acquisition trail in the U.S. bus market. "It is a massive market that is still largely state run, so I would expect them to do more deals," said Andrew Murphy, transport analyst at WestLB Panmure in London.
Stagecoach currently has 16 percent of the U.K. bus market and is also a major player in the privatized British railway industry. Besides four rail franchises, the company also owns the highly profitable rolling stock leasing company, Porterbrook. It also has bus operations in six other countries worldwide and has airport and toll road interests.
In the year to April 30, Stagecoach had net earnings of 158 million pounds ($255 million) on revenue of 1.55 billion pounds. The company's shares were up 1.79 percent at 226 pence in London, in a declining market. 
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