Stagecoach drives back into capital bus market

Four years ago, the South West Trains owner sold the business, now known as East London Bus Group, to Macquarie Bank for 263.6m.

East London went into administration after a decline in profitability but has maintained a strong share of the London bus market, according to Stagecoach.

Chief executive Brian Souter said: "We operated a successful bus business in London for several years and are pleased to re-enter the London bus market at what we consider to be an attractive price."

The business, which operates from 10 depots, has a fleet of around 1,400 buses and an estimated 15 per cent share of the London market.

Almost all of its revenue is generated through a contract with Transport for London, providing it with a fixed fee for operating the services.

Stagecoach's bus division currently operates in around 100 towns and cities, running a fleet of around 7,000 buses and coaches.

Mr Souter said his company would "relish" the opportunity to apply its expertise in managing UK bus businesses to turnaround the acquired firm.

"The profitability of ELB is a fraction of what it was under Stagecoach's ownership – 9m in the year to March 2010 compared with 23.6m in the year to April 2006," said Arbuthnot analyst Gerald Khoo.