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Drive for market in booming area.

Byline: By Nigel Stirling

TRANSPORT operator Go-Ahead has consolidated its position in the Southampton bus market with the pounds 4.4m purchase of a small bus and coach operator.

The Newcastle company has bought Marchwood Buses for pounds 3m cash through its current Southampton company in a deal which will also see it eventually assume pounds 1.4m of net debt.

Marchwood Buses, which has a staff of about 80, runs 51 vehicles as a franchisee of Solent Blue Line and generated profits of pounds 535,000 in the year to the end of March on turnover of pounds 4.1m.

Go-Ahead bought Solent Blue Line in June last year and employs some 100 staff.

The Tyneside operator expects rationalisation of back office resources and parts of the bus network to lead to net annual savings of pounds 160,000 through the consolidation of the two businesses.

Finance director Ian Butcher said: "The previous management negotiated a very modest premium with Marchwood Buses for the right to operate under licence. It is not something that we would have done and we have been keen for some time to rectify that."

Solent Blue Line would forgo a pounds 40,000 annual licensing fee from Marchwood Buses but would gain operating efficiencies of pounds 200,000 through the merger.

The deal is set to push Solent Blue Line into a profit-making position once rationalisation of the two businesses has taken place. The company, which generates pounds 6m of sales, is in a break-even position, Mr Butcher said.

The Southampton market is currently dominated by First - which runs 300 vehicles - Solent Blue Line and some smaller operators.

The acquisition would give Go-Ahead critical mass in the Southampton market, set for a huge number of new houses in the next 10 years.

Mr Butcher said the company was confident of increasing its Southampton business through organic growth rather than targeting its larger rival's share of the market.

He said: "There are a number of synergy benefits that we can get immediately through consolidating the back office functions and serving the same number of passengers from fewer vehicles.

"Longer term ... there will be opportunities for organic growth in the size of the market."


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Title Annotation:Business
Publication:The Journal (Newcastle, England)
Date:Oct 25, 2006
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