27th Jun 2019 09:10
(Alliance News) - Rotala PLC on Thursday said it has agreed to buy Bolton depot and the "majority of businesses" of First Manchester Ltd, a part of public transport operator FirstGroup PLC, for GBP5.3 million.
The investment company said it will pay the total consideration in cash on completion, which will be satisfied from its existing bank facilities.
The business to be acquired from First by Rotala comprises 18 commercial bus routes operating in the Bolton and Bury areas and into the centre of Manchester, Rotala explained. Meanwhile, the Bolton depot is a purpose-built bus depot, which covers an area of 6.7 acres and is capable of operating up to 200 vehicles. About 500 staff will also transfer to Rotala with the business.
The acquisition will enable Rotala to create a business which will have a "substantial" share of the bus market in the Greater Manchester area and which will become the largest division in the Rotala group, it explained. The company already has two smaller depots in Greater Manchester, in Eccles and Atherton, operating approximately 90 vehicles.
The acquisition is expected to be earnings accretive in the first full year following completion, and Rotala said it believes it will benefit from material additional sales, earnings before interest, taxes, depreciation, and amortization, and pretax profit contributions.
For the 12 months to the end of March, it is estimated that the First Manchester's revenue, Ebitda and pretax profit will be GBP24.7 million, GBP2.3 million, and GBP300,000, respectively.
The completion of the acquisition is expected in August.
Under the terms of a separate vehicle leasing agreement, Rotala has agreed with First to lease from it 125 vehicles which are used at the present time to service the 18 commercial bus routes being purchased.
These vehicles will be replaced progressively by Rotala with more modern vehicles by the end of June 2021, it said, and the leased vehicles will be returned to First by that date.
"This acquisition represents an exciting opportunity to expand significantly Rotala's presence in the Greater Manchester bus market," said Chair John Gunn.
"We can expect more divestment by the big bus groups in future years. Rotala aims to be a major player in these market developments in years to come," added Gunn.
Rotala shares were trading 0.2% higher on Thursday morning in London at 60.10 pence each. FirstGroup was up 0.5% at 98.34p.
Related Shares:
ROL.LFirstgroup