STAGECOACH replaced its chief executive with immediate effect and without warning or convincing explanation yesterday - triggering an estimated #1m pay-off for the departing Mike Kinski.

Finance director and acquisitions specialist Keith Cochrane, who was passed over for the top job when Kinski joined Stagecoach from ScottishPower less than two years ago, is the new chief executive. Cochrane is only 35.

A company insider pointed yesterday to a power struggle between Kinski and Brian Souter, the maverick executive chairman of Stagecoach.

Cochrane insisted there was ''no disagreement on any of the business decisions that have been made''.

However, asked why Stagecoach was willing to bear the significant cost of Kinski's pay-off, Cochrane replied merely that the matter had been ''debated'' and ''mutually agreed''.

It was considered an ''appropriate juncture'' because Kinski had concluded the transition plan for Coach USA. Stagecoach acquired Coach, the US's second-largest bus company, in a #1.1bn deal last year.

But the City was spooked and Stagecoach shares tumbled another 7p to 108p, in a mixed transport sector. The head of Coach USA is also leaving immediately.

Perth-based Stagecoach denied a suggestion that Kinski was leaving because he was opposed to Souter's personal campaign against the proposed repeal of Section 28 by the Scottish Parliament. This clause prohibits promotion in schools of homosexuality and Souter has pledged funding, estimated at #1m, to the campaign for its retention.

City transport analysts, who had been with Kinski, Souter, and Cochrane on a visit to Coach USA's headquarters in Houston, Texas, only two weeks ago, were concluding there must have been some kind of blow-up between Kinski and Souter.

One analyst who went on the visit said: ''Kinski probably seemed the most enthusiastic of the lot and he was really into it.

''I think it is really surprising he has gone. I think there was some sort of a major argument - probably between Souter and Kinski - on some strategic issues.''

He thought Kinski's six-month spell as a consultant to Stagecoach, announced by the company yesterday, was ''probably no more than a redundancy package''.

The analyst said of Cochrane: ''I think he is quite a safe pair of hands. I think he is very well liked in the investment community. He is quite well organised.''

Kinski has been tipped for a top job at the Post Office. He is a

non-executive director of the

Post Office and chairman of its remuneration committee. Yesterday's announcement further fanned speculation about this.

But Stagecoach's statement said only that he was ''leaving to pursue other business interests''.

And a Post Office spokesman said: ''There is no foundation to this (speculation). In any event, such an appointment is a

matter for the Government, namely the Department of Trade and Industry. We are sure you would find them as surprised

as we are at this unfounded suggestion.''

An industry observer said: ''(I) always thought the potential for trouble between Souter and a flamboyant, forceful personality like Kinski was always there, so it was no surprise.''

This view was echoed by a

well-placed company insider,

who noted Kinski's ambition

and added: ''Possibly, having an executive chairman, he found it difficult to fulfil that ambition.''

Asked if Kinski would receive a pay-off in lieu of notice, a Stagecoach spokesman replied: ''We are honouring his contract.''

This implies a pay-off of at least #720,000 plus benefits, based on the two-year contract Kinski is believed to have been on and his basic 1999 salary of #360,000. But an insider indicated the total pay-off would be about #1m because of a salary rise and bonus or pension elements.

His share options look to be worth nothing. The exercise price is 227p - below the 239p level of a year ago but more than double yesterday's close.

Cochrane was on the phone to City transport analysts yesterday

- assuring them there were no financial skeletons in Stagecoach's closet and that there was therefore no need for them to revise profit forecasts.

Stagecoach - which has lost its status of stock market darling as investors have neglected the transport sector to chase Internet companies and telecoms players higher - unveiled a raft of management changes yesterday.

Larry King, executive chairman of Coach USA, is also leaving with immediate effect.

Frank Gallagher, Coach's chief operating officer, will succeed King in this role and on Stagecoach's board. He will report directly to Cochrane.

This move was less of a

surprise to the City, given that King was no longer heading an independently quoted company.

Linda Burtwistle, a senior member of Stagecoach's finance team, will become finance director of Coach.

Ross Martin, who heads Stagecoach's booming bus and ferry operations in New Zealand, will assume additional responsibility for Citybus in Hong Kong and for the group's small bus operation in Australia.

Stagecoach is seeking a new finance director.

The spokesman said a ''number'' of external and internal candidates had been shortlisted.

Cochrane highlighted renewal of UK passenger train franchises and US expansion as his ''challenges for the coming

year''.

The City transport analyst believed it ''possible'' that Kinski, who is married with children, might have left because of a row over the Section 28 issue.

''If you are a highly moral person, then maybe you have no choice,'' said the analyst.

But the Stagecoach spokesman said: ''The bottom line is Clause 28 isn't a matter for Stagecoach and it hasn't even been discussed in the building. It is a matter for the chairman and it is his personal position.''

Kinski could not be contacted yesterday.

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