Stagecoach buys Hong Kong bus operator in pounds 276m deal

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The Independent Online
STAGECOACH, the bus, rail and airport group, yesterday unveiled a further overseas expansion by acquiring the Hong Kong bus operator, Citybus, in a pounds 276m deal.

The takeover, which is being funded in part by a pounds 140m share placing, will make Stagecoach the dominant player in the colony, accounting for 63 per cent of the local bus market.

Citybus is owned by a company controlled by a well-known arms dealer with top level connections in the Chinese leadership. It has a fleet of 763 buses, 4,200 staff and is one of four franchised bus operators in Hong Kong.

The business made pre-tax profits in 1997 of pounds 10.4m and had net assets of pounds 90m. Stagecoach is paying HK$1.95 a share for Citybus, valuing the equity at pounds 181m, and taking on a further pounds 95m of debt.

Citybus is owned by a company controlled by Tsui Tsin-tong, who is well known for his ownership of an arms trading company. Mr Tsui amassed an enormous fortune in a short period of time. He staunchly denies that arms trading was the source of this wealth. However, he is one of the only businessmen in Hong Kong to have registered a company that specifies arms trading as its main purpose of business.

Mr Tsui is no longer associated with this company but retains strong connections with China North Industries Corp (Norinco), a massive conglomerate that is also one of China's main arms producers. Norinco in turn was a founding shareholder in Citybus through a subsidiary company.

Tsui Tsin-tong was also a partner with Norinco in a company called Rex International, which was forcibly closed by the British authorities in the last month of colonial rule over Hong Kong. The reason for the closure was given as "military related". Unofficially it was stated that the company had been involved in illegal arms shipments to the Middle East.

When Mr Tsui established Citybus, Hong Kong's smallest but until recently, its most progressive bus company, he was intent on diversifying his interests. In a style that typifies his cultivation of political contacts, he brought Sir David Akers-Jones, a former chief secretary in the colonial regime, onto the board of his parent company.

However, Mr Tsui's main political connections are with the Chinese leadership. It was with their blessing that he formed a company called the New China Hong Kong Group, bringing together a breath-taking collection of blue chip companies and Chinese state entities.