PERTH, Scotland - Stagecoach Group PLC plans to sell the Southeast region of Coach USA, including the Florida operation, to a group of private investors that includes two New York-based investment organizations.
The sale price is $48 million.
The Southeast region of Coach USA is composed of eight companies in Maryland, Georgia, North Carolina, as well as Florida. The units in those states operate more than 500 vehicles and employ 620 people. The deal also includes the purchase of an additional 58 vehicles, representing $5 million of the purchase price.
Completion of the transaction is subject to normal regulatory approvals, final confirmation of financing and routine closing conditions. The buyers are paying $40 million in cash, with the balance financed with an $8 million note.
Coach USA's Southeast region has been one of its better performing units despite the lousy economy and the travel slump in Florida. The region had sales of $49.8 million in the 12 months ended April 30, with an operating profit - before goodwill amortization - of $5.8 million, or a margin of more than 11 percent.
Among the companies included in the sale are such well-known operators as America Charters of Charlotte, N.C.; Southern Coach Co. of Durham, N.C.; American Coach Lines in Norcross, Ga.; Grayline of Fort Lauderdale, Fla.; American Bus Lines in Miami; Tippett Travel in Florida, and Dillion's Bus Service in Millersville, Md.
At one time, these Coach USA companies were owned by such industry stalwarts as Louis Wade Jr., Billy Ray Rhyme, Calvin Cooper, Michael Gaddis, Marie and Charles Tippett, Louis Cicerone and the Dillons, Keith, Brian and Ron.
Brian Souter, chief executive of Stagecoach Group, said: "We are continuing to make excellent progress on the restructuring of Coach USA and this is a further milestone in the delivery of our North American strategy.
"We are now pressing ahead with the remaining elements of our disposal program. I believe we are well on track to achieve our objective of a smaller, but nevertheless substantial and more robust U.S. business focused on our successful operations in the northeast and north central regions," Souter said.
Eight months ago, Souter unveiled plans to completely restructure Coach USA, including the sale of a number of units over a 12 to 18-month period. Since then, it has announced the sale of its transit division, plus its New England, South Central and West regions, along with taxi operations in Kansas City, Long Island and Indianapolis. A number of individual operations have simply been shut down.
Together with the sale of the Southeast region, Coach USA has realized more than $270 million from the sale of the operations that were sold. Next on Stagecoach's agenda is the disposal of its Canadian region, as well as the remaining taxi businesses.
When all is said and done, what's left of Coach USA will be concentrated in Northeast and North Central states, including New York, New Jersey, Pennsylvania, Illinois and Wisconsin. Together, these operations accounted for about one-third of Coach USA annual revenue.
Coach USA sales for the year ended April 30, were $972 million, down from $1.1 billion in fiscal 2002. Operating profit was $22.6 million, compared to $61.3 million the year before, representing a drop in operating margin from 5.6 percent in fiscal '02, to 2.3 percent in fiscal '03. The decline in margins reflects the drop in company revenue, increased insurance costs and a significant fall in taxicab sales.
Stagecoach says it intends to develop the remaining Coach USA businesses "that perform well and have predictable revenue streams," as well as reduce its charter and leisure-related business. "In addition, we have successfully retained key management and further reduced our corporate and regional overhead base," the company said.
The Scottish company also said that business conditions for Coach USA remain challenging "and we have not seen any major improvement in the trading (business) environment. Nevertheless, Coach USA remains cash generative and profitable. We have many strong performing businesses in the residual Coach USA portfolio and we are continuing to redeploy existing assets to maximize asset utilization and to eliminate unnecessary capital expenditure."
The buyer of the Southeast region is an investment group composed of a newly formed affiliate of Lincolnshire Management Inc., Echo Bridge LLC and unidentified private investors. Sources said managers of the acquired companies may be given an opportunity to invest in the new organization.
Lincolnshire Management is a New York-based private equity fund manager. Since the company was founded in 1986, it has completed more than 45 acquisitions. Echo Bridge also is based in New York and invests in middle market companies in North America, the United Kingdom and Europe.