DTI forces Stagecoach to sell Mainline stake

BY RUSSELL HOTTEN

Stagecoach, whose controversial expansion has made it the UK's biggest bus company, has been forced by the Department of Trade and Industry to divest its 20 per cent stake in another operator.

Shares in Stagecoach fell 28p to 209p after Jonathan Evans, the corporate affairs minister, said the company's £1m investment in the Yorkshire-based operator, Mainline, was against the public interest.

Stagecoach's aggressive acquisitions policy has made it the subject of 20 inquiries by the Office of Fair Trading. Last month it was banned from a route it had operated for 60 years by the Scottish Traffic Commissioner for breaching regulations.

The Mainline inquiry was one of several referred to the Monopolies and Mergers Commission, which ruled that Stagecoach should not raise its 20 per cent stake. The DTI said this did not go far enough and has given Stagecoach three months to sell its holding. Brian Souter, executive chairman, said it would have no material effect on Stagecoach's profitability.

The MMC's report said that agreement with Mainline strengthened services in Sheffield, but had reduced competition in the South Yorkshire area, and therefore the investment should be capped. But Mr Evans said : "I am not persuaded that the remedy recommended by the MMC would be sufficient to address the adverse effects they have identified.'' Stagecoach executives must step down from Mainline's board.

Mr Evans was strongly criticised by Peter Sephton of Mainline, who said: "We are very concerned at this outcome. We believe that the overall balance of evidence available points to the benefits to service quality identified by the MMC themselves. We feel that the minister has missed the real issue here.''