End of the Line for Laidlaw
FirstGroup plc said Feb. 9 that it's buying the U.S. school bus and Greyhound Lines operator Laidlaw International (LI) for around $3.6 billion, including the assumption of $800 million of debt.
The agreement, which the two companies hope will create a bus transportation powerhouse in North America, remains subject to anti-trust approvals and expires Aug. 8.
Laidlaw recently clawed back in 2003 from its bankruptcy of 2001. "Our goal for the past four years has been to develop, demonstrate and deliver shareholder value. We believe this transaction is the epitome of that goal and represents an excellent opportunity for both companies' employees and shareholders," said Laidlaw CEO Kevin Benson in a press release. "It will provide a sound economic and operational base from which to continue many of the efficiency initiatives that we have underway."
FirstGroup expects to generate around $70 million annualized pre-tax cost savings in the first full financial year following the deal's completion, when it should also begin growing earnings.
Of course, savings in these kinds of deals typically involve labor costs. Teamsters union General President Jim Hoffa called for both companies to ensure that workers' job security would be protected, repeating similar concerns he raised on Feb. 5. Together, FirstGroup and Laidlaw would dominate the privatized school bus market in the United States, Hoffa said in a press release Feb. 9. "We are determined to drive up standards in the school bus and passenger transport industries and we stand prepared to protect our members' interests as this buyout progresses," Hoffa said.
Under the terms of the agreement, Laidlaw shareholders will receive $35.25 for each outstanding share of Laidlaw common stock. Investors bid up the stock more than 9% to $34.58 per share on the New York Stock Exchange Feb. 9.
First Group has been investing in the U.S. since 1999. "FirstGroup's acquisition of Laidlaw will considerably enhance FirstGroup's existing activities in North America," CEO Moir Lockhead said in a press release.