Stagecoach bids pounds 40m for GMBS

More than 2,000 Manchester bus workers each found themselves pounds 9,000 better off yesterday when Stagecoach, Britain's biggest bus company, offered pounds 40.7m for the south Manchester bus operation, GMBS.

The valuation of around pounds 50m, taking into account GMBS's debts of around pounds 10m, is more than double the pounds 20m offered by Stagecoach two years ago when Manchester's two bus companies were privatised. The company was sold to a management-employee buyout team for pounds 25m - and staff who took 1,000 pounds 1 shares will now get pounds 10 for each share.

Taking into account Stagecoach's recently announced acquisitions of Cambus, Devon General and one of the first rail franchises, South West Trains, turnover for the company will reach around pounds 770m this year. The company has 17 per cent of the country's bus market, compared with 4 per cent at its flotation in 1993.

GMBS operates most of the local bus services in south Manchester and has around 750 buses and coaches. It reported an operating profit of pounds 4.9m last year and profit before tax of pounds 2.9m on a turnover of pounds 51.2m last year.

Stagecoach is confident that the bid, unlike many of its others, will not be referred to the Monopolies and Mergers Commission. Employees will be offered 577 new Stagecoach ordinary shares for every 200 GMBS shares they hold.

Since 49 per cent of the company is in the hands of the venture capital houses which are expected to recoup their investment and profit, Stagecoach is seeking financing of pounds 19.9m by offering 6 million shares which are being placed by Noble Grossart and UBS at 331p per share.

Stagecoach says that the main purpose of the placing is to cut borrowings and contribute to acquisition costs. The placing is not conditional on the successful completion of the purchase of GMBS. Derek Scott, finance director of Stagecoach, said: "It seems we considerably underbid when we first tried to acquire GMBS. "