FirstGroup boards US school buses for pounds 602m
Thursday 22 July 1999
The purchase of Ryder Public Transportation Services (RPTS) will be part funded by a one-for-four rights issue at 275p to raise pounds 238m and is likely to be followed by further bolt-on acquisitions of other school bus operators. First Group shares rose 9.5p to 333p.
The deal will increase the turnover of FirstGroup, which also operates three UK rail franchises, by 25 per cent and give it a significant presence in the US public transport market.
RPTS, part of the huge Ryder logistics and truck leasing group, has a fleet of 11,000 yellow school buses and transports 650,000 students a day in 25 states. It has a market share of around 3 per cent, compared with 9 per cent for the biggest US school bus operator, Laidlaw.
In addition, RPTS has a public transport contracting business, which provides services ranging from management to supply of bus drivers to 30 different states, and a fleet maintenance business.
FirstGroup's chief executive, Moir Lockhead, said the three markets served by RPTS had annual revenues of $25bn. They were also growing quickly because of the second US baby boom, which has led to a huge increase in school student numbers, and the shift to private contracting by state school boards.
Last year the Cincinatti-based RPTS made operating profits of $62m on sales of $582m. The purchase will raise FirstGroup's debt levels to pounds 850m but the company said it would be earnings enhancing immediately before goodwill write-down.
Trevor Smallwood, FirstGroup chairman, said it aimed to expand by acquiring other privately-owned school bus operators. The US school bus market is worth $14bn and there are 5,000 private operators.
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