Penny stocks pay off for Mainline

MORE THAN 2,300 employees of Mainline, a Yorkshire bus company, were yesterday told they would receive payouts worth up to pounds 32,000 each if they vote in favour a takeover in three weeks time.

FirstGroup, the pounds 1.4bn transport group, yesterday offered pounds 28.7m for the employee-owned company, putting a price of pounds 6.40 on shares bought five years ago by employees for the princely sum of a penny each.

In one example, Geoff Perry, a 64-year-old coach painter, holds 5,000 shares after 44 years of service with Mainline and its predecessor companies. He stands to gain pounds 32,000 if the offer goes through.

Employees at Mainline became partners in the Sheffield-based company in 1993, when the local bus operation was sold to employees by Sypta, the South Yorkshire Public Transport Authority. It runs 700 buses and provides services to Sheffield, Doncaster and Rotherham.

Shares with a nominal value of a penny were given to all permanent employees in an attempt to fight suggestions that the privatisation was purely to the benefit of City "fatcats".

Within a year the shares had risen to 85p. By 1995, when FirstGroup bought a 20 per cent stake in the company, the shares had doubled to pounds 1.50. At the end of March, auditors said the shares were worth pounds 2.30 each.

Steve Arnold, a spokesman for Mainline, said: "The only qualification [for shares] was a person having two or more years of service. As it was said at the time - all shareholders were created equal. There has always been a feeling of inevitability that an offer like this would come along at some point."

FirstGroup bought the bus company as part of a strategy of expanding by acquisition. In March, the transport group bought Great Western Holdings, owners of the Great Western Railway franchise, and a majority stake in Bristol International Airport.

Employees will be offered 111.24 shares in FirstGroup, plus pounds 160 in cash, for every 100 Mainline shares.

Investment column, page24