Metroline chiefs set for windfall on flotation

Directors at one of the last independent bus companies of the old London Transport network will reap a multi-million pound harvest when the operator is floated on the stock market this summer.

Metroline, which has a fleet of 430 buses and runs routes from Harrow into the capital, is looking to raise up to pounds 5m through an institutional placing - valuing the company at pounds 35m.

Staff at Metroline Holdings will also share in the payout - with more than 500 bus drivers and conductors in line for cash windfalls of up to pounds 27,000.

The directors, who collectively put up pounds 110,00 in 1994, will see the value of their investment increase by up to eighty times the original value. Declan O'Farrell, the company's managing director, put up pounds 40,000 three years ago and has an 11 per cent stake. His paper worth after the flotation will shoot up to pounds 3.3m.

Metroline's 700 staff were given an average of 330 shares each through a profit-sharing trust when it was bought from the Government in a management buy-out backed by Granville Private Equity Managers in 1994. GPEM will have to sell some of its equity in order to get 25 per cent of the company on the market - a pre-requisite for a full listing.

The size of the share allocations for staff, unusually, was calculated on the length of an employee's service rather than his or her position in the company. The average staff holding is likely to be valued at about pounds 9,000 at the time of the flotation.

Mr O'Farrell said yesterday that the money would be used to pay back pounds 2.5m of loan stock and expand Metroline's presence in the London area, where it has 6 per cent of the bus market.

"We have to replace many of the older double-decker buses to update our fleet to be able to win more new franchises," said Mr O'Farrell. "As well as vehicles we will look to invest in new depot sites. We have grown our share of the market from 4.5 per cent in 1994 to 6 per cent today and intend to get a larger share."

Although the new Government has indicated that it wishes some re-regulation of the bus industry, it is unlikely to affect the capital's routes - which are contracted out for five-year terms under the supervision of the public sector.

Metroline is one of only two companies left of the London bus network - split into 11 bus divisions - which has not been gobbled up by the bigger transport concerns after the government auctioned them off in 1994.

The company made adjusted pre-tax profits of pounds 3m on sales of pounds 37.1m for the year to October 1996. Mr O'Farrell is keen to expand the company. "In the future we shall be in the market for London Underground Tube franchises should they become available or look for more acquisitions,'' he said.