Mayflower and Henlys bury past rivalry to merge UK bus building

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The Independent Online

Mayflower, the maker of bus and car bodies, and its competitor Henlys Group put aside past rivalries yesterday with a deal to merge their British bus and coach-making operations.

Mayflower, the maker of bus and car bodies, and its competitor Henlys Group put aside past rivalries yesterday with a deal to merge their British bus and coach-making operations.

However, the agreement failed to halt a steep slide in Mayflower's shares. The company, releasing its interim results, said sales in key markets were facing heavy pressure.

The new group, TransBus International, will become the largest player in Britain and the fourth-largest in its sector in Europe. It will combine Henlys' Plaxton unit with Mayflower's Walter Alexander and Dennis businesses. Combined revenues will be more than £450m a year.

Two years ago Henlys and Mayflower fought a protracted takeover battle for Dennis, the chassis maker, which ended in a £269m victory for Mayflower.

Robert Wood, Henlys chief executive, said: "Despite that disagreement two years ago, the UK business, Plaxton, continued to do business with Dennis. At that level, it was business as usual."

The deal, which will not include the companies' operations in North America, was seen by analysts as a defensive move to hold ground in a rapidly consolidating industry.

Shares in Mayflower, which unveiled a 15 per cent rise in pre-tax, pre-exceptional profits to £30.2m in the six months to June, yesterday sank 18.5p to 124p. Analysts reacted coolly to further signs of a slowdown in the company's markets and static turnover of £335m. They also highlighted lower profits for the group's car bodies unit caused by a planned five-week shutdown of the line that supplies the Phoenix Consortium's Rover Group.

"All of [Mayflower's] markets are having a tough time," one analyst said. "They didn't want to give any figures [for cost-savings from the TransBus deal]. It's pretty vague."

Neither Mayflower nor Henlys detailed the cost savings expected to flow from the formation of TransBus, which must be approved by the Office of Fair Trading. The savings are, however, expected to total more than £10m a year.

TransBus operations, which are spread across Britain, have a combined head count of 3,350, and jobs will be cut as the businesses are brought together. Mayflower said the deal was expected to boost earnings per share by 5 per cent from next year.

The new group will be 70 per cent held by Mayflower, with the rest held by Henlys. The companies said the split reflected the expected medium-term profitability of the TransBus units. No cash changed hands, with the deal underpinned by a pooling of operating assets.

Mayflower's interim results highlighted gathering pressures in bus markets across Europe, the United States, Singapore and Hong Kong.

"Traditional markets - UK, Hong Kong and Singapore - are showing signs of slowing down," Mayflower said.

"However, the recent UK government statement that £180bn is to be invested in the national transport system over the next 10 years could see a reversal of this trend."

Henlys' shares added 11.5p, closing at 395p.

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