Optare, which has 500 staff and has just opened a state-of-the-art bus assembly plant at Sherburn-in-Elmet, warned recently it was unlikely to continue trading without the tie-up.
The Indian bus maker owned by the Hinduja Group holds a 26% stake in Optare and will treble it to 75% under a share placing that will provide Optare with access to a £12 million credit line.
The proposal received overwhelming support in a vote involving 70% of shareholders. The deal had looked in danger over Christmas after rival Alexander Dennis, which is backed by Stagecoach founder Sir Brian Souter, requested information on a potential takeover.
However, it walked away after Ashok Leyland said it had no intention of selling its shares in Optare to “anyone at any price”.
Optare chief executive Jim Sumner said today: “This is a real vote of confidence in both Optare and Ashok.
“Even though the plan has involved diluting current shareholders, it is recognised that this deal is in the best interests of the business long term and secures its future within one of the world’s top five bus makers.”
The bus building industry has been impacted by a lack of trade credit insurance, which along with higher levels of export business, has placed “considerable pressure” on Optare’s working capital requirements.
It told shareholders before Christmas: “To support the company going forward the business requires banking facilities and headroom that is substantially higher than the present arrangements.”
Optare, which was established out of the former Leyland Bus business Charles H Roe in 1985, has an order book worth £59 million after it recently unveiled a contract to supply 190 of its Solo SR midibuses to Cape Town in South Africa.
Components will be supplied by Optare and assembled by South African firm Busmark 2000 at a new plant in Cape Town.
The current order book, which compares to £34 million in January, stands to get a further boost following the Government’s recent announcement of a further round of ‘green’ bus funding from April.