UK’s First Group to Purchase Parent Company of Laidlaw Education Services

LONDON (Feb. 9, 2007) – FirstGroup plc, the parent company of school bus contractor FirstStudent, appears to be poised to increase its school bus reach amid news it will purchase Laidlaw International for US$3.6 billion.

In a company release, FirstGroup said it will pay $35.25 per share, 11 percent above Laidlaw’s closing stock price the day prior. FirstGroup will also assume about $800 million in Laidlaw International debt.

Laidlaw International announced in January that the company missed its forecasted first quarter earnings due in large part to revenue losses in its Greyhound transit business owing to fare hikes, network hikes and investments the company was making in Laidlaw Education Services, the nation’s largest school bus contractor (see story, page 34). Laidlaw’s school bus revenue accounted for approximately 50 percent of the company’s total $3.1 billion revenue for the fiscal year that ended Aug. 31, 2006.

The merger will potentially create a contractor of 60,000 yellow school buses in the U.S. and Canada, more than 50 percent of the total contracted fleet though only about 13 percent of the total fleet of 475,000 school buses. Laidlaw’s Website reports the company services about 1,000 school districts while First Student’s Website reports the company services about 400 customers.

Merging Brands
“This transaction represents an excellent opportunity for our employees and stockholders,” said Kevin Benson, president and CEO of Laidlaw. “The combination of Laidlaw and FirstGroup will bring together two well-known brands and two well-respected companies that share a very strong focus on employee and customer satisfaction. I am delighted to recommend this transaction to our stockholders.”

The transaction, if approved by both FirstGroup and Laidlaw shareholders and the receipt of necessary U.S. anti-trust approvals, is expected to generate approximately $70 million in pretax savings in the first full financial year following its completion, FirstGroup representatives said.

In a press release accompanying the announcement, FirstGroup said it would achieve the savings through “rationalisation of the network and removal of overlapping operations, removal of excess spare fleet, reduction of equipment stock (including) spares, sales of excess owned properties, purchasing improvements, and reduced insurance costs.”

FirstGroup’s U.S. subsidiary First Student, has been the target of an international labor coalition campaign seeking to change the company’s service and labor relations for drivers. At press time it was unclear what effect the pending acquisition may have on the coalition’s organizing strategies. However, Teamster General President Jim Hoffa called for “both companies to ensure that workers’ job security would be protected.”