FirstBus told to sell part of Scottish operation

The Department of Trade and Industry yesterday ordered FirstBus to sell some of its Scottish bus activities after ruling that its proposed pounds 96m acquisition of Glasgow-based SB Holdings could act against the public interest.

The DTI's decision is a blow to FirstBus, which became Britain's biggest local bus operator when it bought SBH last May. The action by the DTI is based on a recommendation by the Monopolies and Mergers Commission which invesigated the deal. Shares in FirstBus fell 4.5p to 221p on the news.

"FirstBus should be required to divest the business of its subsidiary Midland Bluebird, plus part of the Glasgow operations of SBH and should identify a firm buyer within nine months of the publication of the MMC's report," the DTI said.

The FirstBus operations earmarked for sale by the DTI, including at least one of SBH's four central Glasgow bus depots, are thought to have a combined annual turnover of pounds 40m, compared to estimated group sales of pounds 750m.

If FirstBus does not find a firm buyer, or fails to proceed with a sale within nine months, it would have to sell SBH "in its entirety", the DTI added.

FirstBus said it was disappointed by the decision by John Taylor, Minister for Corporate and Consumer Affairs, and said it would seek further clarification.

"We need to sit down with the competition authorities to find out what it means," said Trevor Smallwood, executive chairman of FirstBus.

However, he said that the ruling on Midland Bluebird, which operates in central Scotland, was not entirely unexpected.

Mr Taylor said FirstBus was by far the largest operator in central and south-east Scotland where SBH supplied 40 per cent of the bus service and FirstBus's other subsidiaries 21 per cent.

"The scale and dominance of FirstBus/SBH in central and south-east Scotland was likely to deter competition with SBH from the other two large adjacent operators, Stagecoach Holdings and Cowie Group," Mr Taylor argued.

"It would also deter entry by others."

Mr Taylor also noted that all four SBH depots in Glasgow were within four miles of the city centre and all had capacity for at least 120 or so vehicles.

But FirstBus said it was concerned about the impact selling one of the depots would have on the quality of bus services in Glasgow.