School Bus Contractors

FirstGroup closes Laidlaw acquisition

Posted on November 1, 2007

ABERDEEN, Scotland — FirstGroup PLC completed its acquisition of Laidlaw International Inc., making it the largest operator of school buses in North America.

The price of the deal came out to $3.4 billion, which is about $200 million less than initially expected. The merger was proposed in February but took about seven months to close, mainly due to review processes and negotiations with antitrust authorities.

Laidlaw International, based in Naperville, Ill., is the holding company for Laidlaw Education Services — which runs about 40,000 school buses in the U.S. and Canada — along with Greyhound Lines, Greyhound Canada and Laidlaw Transit.

FirstGroup is the British parent company of Cincinnati-based First Student — which runs about 22,000 school buses in the U.S. and Canada. FirstGroup is the largest bus and rail provider in the U.K. and also operates First Transit and First Services in North America.

Company officials said that Laidlaw Education Services will become a part of First Student, bringing the total school bus fleet to more than 60,000 — about 12 percent of the approximately 500,000 school buses in the U.S. and Canada.

To meet antitrust requirements, FirstGroup will divest about 800 school buses in various locations. In Alaska, for example, First Student’s Anchorage school bus business will be sold to Forsythe Transportation.

The Anchorage sale “will help to ensure continued competition for school bus contracts in Alaska after the merger, to the benefit of Alaskan taxpayers,” said Thomas Barnett, assistant attorney general in charge of the U.S. Department of Justice’s Antitrust Division.

In Massachusetts, FirstGroup will sell nine school bus contracts to another operator. The state’s attorney general, Martha Coakley, led a multi-state investigation and lawsuit alleging that FirstGroup’s acquisition of Laidlaw would violate antitrust laws.

The case was settled in late September. Along with selling contracts, FirstGroup agreed to pay the states involved a total of $1.1 million to cover the costs of the investigation.

Still, FirstGroup officials said that the company plans to pursue new contracts. “There are a number of geographies that we aren’t currently present in, and we can also grow this market, we believe,” said Chief Operating Officer Dean Finch, who will be leading the company’s North American management team.

FirstGroup Chief Executive Moir Lockhead said that the company and its customers stand to benefit from increased economies of scale.

“Our ability to purchase at a higher level things like insurance, fuel, vehicles … we think will allow us to improve the service that we’ve been providing to the school boards and win more business,” Lockhead said.

Regarding the potential impact on employees, Lockhead said when the deal was proposed that “those people who are engaged in running buses in our network in North America and those that are running them with Laidlaw will continue to do that. I welcome them all into FirstGroup.”

Finch said the company expected no disruption in service to school districts. “Day-to-day contact will remain as it is now, and they can still call up their branch managers — they will be there for them,” he said.

FirstGroup’s first large U.S. investment came in 1999 with its acquisition of Ryder Public Transportation Services. First Student was formed from the combination of Ryder’s school transportation division and several other large busing companies.

With the merger of First Student and Laidlaw, National Express Corp. becomes the second-largest pupil transportation provider in North America. The company, which is also owned by a British firm, operates about 14,500 school buses under the brands Durham School Services in the U.S. and Stock Transportation in Canada.

Nearly 120,000 of the 473,000 school buses in the U.S. are owned by contractors. In Canada, contractors own about 30,000 of the 40,000 total school buses.

Related Topics: First Student Inc., FirstGroup America

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