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Stagecoach Grows Megabus Via $134 Million Coach America Deal

May 18 (Bloomberg) -- Stagecoach Group Plc, the operator of Britain’s busiest commuter-train service, said it agreed to buy nine Coach America Inc. businesses out of bankruptcy protection for $134 million to expand its long-distance Megabus network.

The units being acquired are spread across the U.S. and include operations in Atlanta, Dallas and Sacramento, allowing Perth, Scotland-based Stagecoach to add depots and vehicles without relying on subcontractors, it said today in a statement.

Stagecoach said last June it planned to tap surging demand from cost-conscious U.S. travelers by extending Megabus services centered on Chicago, New York, Philadelphia, Pittsburgh and Washington to California, Florida and Texas. The units the U.K. company is acquiring from Coach America had an operating profit of $13.3 million last year from sales of $164.4 million.

“Our North American division is the fastest-growing part of the group and this transaction will allow us to acquire selected businesses and vehicles at attractive prices in markets and regions we know well,” Brian Souter, Stagecoach’s chief executive officer, said in the statement.

2003 Buyout

Dallas-based Coach America was formed in 2003 when buyout firm Kohlberg & Co. bought assets of Stagecoach’s own Coach USA unit. It filed for Chapter 11 on Jan. 3, saying the aim was to reduce debt and emerge with “right-sized capital structure.”

The Stagecoach purchase is subject to approval by the U.S. Bankruptcy Court of Delaware, the company said, adding that it expects to win backing by May 22. The deal also needs antitrust approval and should be completed within three months, it added.

At the option of the seller, a further 85 buses may be purchased for as much as $25.6 million in cash, Stagecoach said.

Stagecoach currently operates about 1,900 vehicles in North America, compared with 7,700 mainly city buses in Britain. It also runs Britain’s South West Trains and East Midlands Trains commuter services and has a 49 percent stake in Virgin Rail.

The Megabus operation was founded in 2006 and links about 80 U.S. and Canadian cities, offering fares starting at $1 and competing mainly with discount airlines and the private car. Bus-based rivals include Greyhound Express and BoltBus, units of Aberdeen Scotland-based FirstGroup Plc.

Stagecoach’s Coach USA, now limited to the northeast, Midwest and Canada, once operated a broader North American business focused mainly on shorter routes and charter services.

To contact the reporter on this story: Chris Jasper in London at cjasper@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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