STAGECOACH could soon run short of UK bus rivals to take over if it

continues expanding at its current breakneck speed.

Busways of Newcastle is the latest to jump on the Perth-based group's

bandwagon in a #27.5m paper deal which will see Stagecoach move

seriously into north-east England for the first time.

The acquisition involves the offer of 246 Stagecoach shares for every

100 held in Busways and a placing of at least 3.4 million shares in the

Scottish company at 173p.

In total, 15.7 million new shares will be issued to meet the

requirements of the recommended offer which is underwritten by Noble

Grossart. Stagecoach shares dipped 2p to 181p yesterday.

Only two weeks ago Stagecoach, which floated on the Stock Exchange

last year, announced the #6m purchase of Western Scottish, the latest in

a string of acquisitions including Kent, Welsh and Humberside coach


Started up by the Souter brother-and-sister team 14 years ago,

Stagecoach will be the UK's biggest bus company, with 4400 coaches in

operation after the Busways and Western purchases are completed.

Since the April 1993 listing, it has now spent more than #60m on

swallowing smaller competitors, though managers are quick to point out

that turnover will also be up from #150m to about #260m.

''We are always looking for new opportunities to increase shareholder

value and Busways is a substantial business in good bus territory where

we have had no presence,'' said chairman Brian Souter.

Busways, which runs 600 vehicles and employs 1750 staff, is the

biggest catch so far. Like most of the others, it was formed in the late

eighties from the Government's split-up of the nationalised bus network.

The region is seen as ideal bus country, with a large area combined

with a reasonable density of population and a relatively low ratio of

car ownership.

In the year to end-March the Newcastle group, which also serves the

Sunderland and South Shields areas, made a pre-tax profit of #3.3m on

turnover of #42.5m. Net assets totalled #7.2m and net borrowings were


Aside from filling one of the few remaining gaps in Stagecoach's UK

coverage, Busways should also benefit from the larger group's economies

of scale in purchasing the likes of fuel and spare parts.

Investment in new vehicles will be increased so cutting maintenance

costs. And operating profits, already running at more than 10% of

turnover, should be further enhanced by Stagecoach's proven corporate

strategy which sets a 15% target figure.

Though a sizeable addition to the Stagecoach fleet, Busways still

represents well under 20% of the parent group's total assets, and

finance director Derek Scott foresaw no difficulties in integration.

''The top three managers are still in their forties but have 58 years

experience in the company between them,'' he said, adding that the

earlier acquisitions were fitting in more quickly than originally


Local management structure and corporate identity should emerge

unscathed and, as in previous takeovers, Stagecoach management stressed

that pay rates and pension rights would remain unchanged. Busways staff

will also be able to take part in their new owner's share saving scheme.

Senior management at Busways, with 51% of the stock, have already

agreed to the Stagecoach bid and most have chosen a mix of new

Stagecoach shares and loan stock.

With less than a month to go before the company's first set of

post-flotation finals are announced, Stagecoach directors are clearly

cautious about predictions though the tone of the latest statement

augurs well for shareholders.

Analysts are looking at pre-tax profits of around #18m on #190m

turnover for the year to end-April, with #25m pencilled in for the

current year.

London, where the last big UK bus sell-off is due in October, is

undoubtedly Stagecoach's next main target area though it is still

relatively weak in south-west England and much of Yorkshire.