Scottish Bus Merger Cleared by UK's Competition Commission
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The UK's Competition Commission (CC) has cleared a local bus merger between McGill's Bus Services and Arriva Scotland West, a month after another attempted bus takeover collapsed following a CC referral. The commission yesterday said that although McGill's and Arriva were "each other's closest rivals" in the market for local bus services in several areas in western Scotland, competition between the two companies was declining, while other bus operators were likely to enter the market. The authority gave provisional approval for the £10 million merger, under which Deutsche Bahn-owned Arriva will sell its business in western Scotland to family-run bus company McGill's. Although the authority found the merger would give McGill's a "very large market share" unlikely to be challenged by existing competitors, Alasdair Smith, the CC's deputy chairman in charge of the merger review, says the threat of new entry by large bus companies such as FirstGroup and Stagecoach will provide a "strong incentive" for McGill's to maintain good services and reasonable fares. "Such a threat would be credible given the resources, location and normal strategy of these companies and, as a relatively small operator, McGill's would want to avoid getting drawn into a potentially punishing battle against a bigger rival," says Smith. McGill's says it is "delighted" with the decision. The bus operator and Arriva agreed to the deal last December. The Office of Fair Trading (OFT), which has conducted an extensive study of the UK bus market, referred the merger to the CC in April for an in-depth review. Peter Watson, at Levy & McRae in Glasgow and counsel to McGill's, says the commission "carried out a thorough evaluation of the transport requirements in the areas where McGill's operate and are completely satisfied with the arrangements". Last month, another merger between local bus operators was called off after the OFT referred it to the CC. Stagecoach dropped its plan to buy First Group's operations in the southern counties of Cornwall and Devon saying it could not "justify spending further money and management time" on a CC review. Marc Israel, at Macfarlanes in London, says the decision shows that "despite the scrutiny to which the bus industry has been subjected over the past few years, local bus mergers are still possible depending on the facts in the local areas concerned." The UK authorities are closely examining local bus markets in the country, after the OFT found in its sector inquiry that the five largest bus operators – Arriva, FirstGroup, Go-Ahead, National Express and Stagecoach – account for 70 per cent of the sector and rarely compete against each other. The CC must take a final decision on McGill's acquisition by 2 October. Counsel to McGill's |