Macquarie buys Stagecoach's London bus business

LONDON, June 23 (Reuters) Australia's Macquarie Bank Ltd said on Friday it was buying Stagecoach Group Plc's London bus operations for 263.6 million pounds (6 million), boosting shares in British bus operators.

Macquarie said in a statement Stagecoach London's ''network of depots creates a unique franchise within its region, and the business benefits from strong cashflow visibility through contracted bus route concessions''.

At 0844 GMT, Stagecoach shares, which had underperformed the transport and leisure sector by 22 percent over the past 12 months, were up 4.0 percent at 111.25 pence to value the business at 1.22 billion pounds. They have now rallied a fifth in value from an 18-month low at 93 pence set on June 13.

Investment bank UBS was bullish on the overall sector.

''Although we do not expect Macquarie to be able to make further acquisitions in London bus -- Stagecoach has a 16 percent market share -- we believe the long-awaited arrival of the infrastructure funds into bus will be supportive for sector valuations,'' UBS said in a broker note.

The bank said London bus operations made up 36 percent of earnings before interest and tax at Go-Ahead, 18 percent at Arriva, 9 percent at FirstGroup and 1 percent at National Express''.

These stocks were sharply higher by mid-morning on Friday, with Go-Ahead up 7 per cent.

Stagecoach London's 1,300 buses and 4,300 staff run over 80 bus routes providing 300 million passenger journeys per year within and from London, principally under contract from Transport for London.

Stagecoach said it would make an estimated consolidated gain of 120 million pounds on the disposal, adding it was to contribute 60 million pounds to a new pension scheme for Stagecoach London members.

Chief Executive Brian Souter said: ''After assessing Macquarie's offer and the prospects for the London bus operations, we concluded that the disposal was in the best interests of our shareholders''.

Stagecoach will look for further organic growth and bolt-on acquisitions for its remaining British bus business, where it has expanded in Merseyside, Yorkshire, Lincolnshire and Tayside over the past year, he said.

The company is due to post full-year results on Wednesday.

REUTERS PV VV1555