Mana Coach

Infratil says it has no plans to sell its minority stake in Wellington bus operator Mana Coach, even though the High Court has ruled out a planned merger with its Wellington bus business.

Infratil subsidiary New Zealand Bus runs the scheduled bus services in Wellington and the Hutt Valley. Mana Coach operates mainly north of Johnsonville and has limited runs into Wellington. Infratil acquired its 26 per cent holding in Mana Coach through the purchase of Stagecoach New Zealand in 2000.

New Zealand Bus was fined $500,000 and costs of about $600,000 by the High Court in 2006 after it tried to buy the rest of Mana Coach without Commerce Commission approval. The Mana Coach vendors at the time, Kerry and Ian Waddell, were found guilty of being accessories to the transaction, but not fined. Their conviction was subsequently overturned on appeal.

The Waddell family sold its 74 per cent stake in Mana Coach to merchant bank Bancorp, which in turn sold it to British transport entrepreneur Brian Souter last December.

Infratil executive Paul Ridley-Smith said yesterday that he expected the ownership structure of Mana Coach to continue in its current form.

Mr Souter was an experienced bus operator as a founder and major shareholder of Stagecoach, he said.

Last week the Court of Appeal turned down an appeal by the Commerce Commission against the High Court's decision not to convict Infratil for its role in the transaction. But the judgment upheld the $1.1 million fines and costs for New Zealand Bus, which were paid in 2006.

British transport entrepreneur Brian Souter has re-entered the Wellington bus business, with Souter Holdings buying Mana Coach Services from merchant bank Bancorp.

The price has not been revealed. Mr Souter founded multinational transport firm Stagecoach and is still a major shareholder.

Mana Coach runs 120 buses in the Wellington region, including Newlands Coach Services.

Stagecoach New Zealand was sold to Wellington investment firm Infratil two years ago for $250 million. Stagecoach New Zealand runs scheduled bus services in Wellington and the Hutt Valley as well as Auckland.

Bancorp bought its stake in Mana Coach from the Waddell family in July last year for an estimated $24 million - a day after Infratil said it would appeal against a High Court decision preventing it from buying all of the company. Infratil already owns the remaining 26 per cent of Mana Coach through the purchase of Stagecoach. Bancorp described its purchase of Mana Coach at the time as a "long-term strategic investment in infrastructure". Infratil finally lost its appeal against the High Court decision last month.

Bancorp managing director Craig Brownie said Mr Souter made an approach to buy Mana Coach "three or four weeks" ago. Mr Brownie denied that Bancorp had been warehousing the shares on behalf of Infratil while it awaited the outcome of its appeal.

Infratil has consistently refused to say whether it had done a deal with Bancorp to buy the shares if the High Court appeal had succeeded.

Mr Brownie said Bancorp always had Infratil in mind as a potential buyer of the Mana Coach shares if it had been allowed to bid for them. "But it would be fair to say that New Zealand Bus would see Souter Holdings as a good co-investor long-term. "As a 26 per cent shareholder they had to be happy with the Souter company coming in. Even though they lost the court case, they are very happy about the outcome."

Returning the company to the control of a highly experienced operator was the best outcome for the business, he said.

Former Stagecoach New Zealand managing director Bill Rae has been appointed chairman of Mana Coach, replacing Mr Brownie, and Geoff Norman will continue as chief executive. Kerry Waddell has left the board, as a Bancorp appointment.

Rival bus companies were not given the chance to bid for prized Wellington bus operator Mana Coach Services, which merchant bank Bancorp bought this week.

Christchurch-based Ritchies Transport, which also runs urban bus services in Auckland, said yesterday that it would have bid for Mana if it had been given the opportunity. "We would definitely be interested in that business and we always have been," director Andrew Ritchie said. "Certainly it is something we would look at in the future."

Buying Mana would have been the easiest way for Ritchies to enter the market, he said. "It is a good business and it has been well run in the past."

Bancorp bought 74 per cent of Mana from the Waddell family for an estimated $24 million. The other 26 per cent is held by Wellington investment firm Infratil, which also owns the Stagecoach buses. Infratil's attempt to buy all of Mana was rejected by the High Court this month after the Commerce Commission opposed the deal as being anti-competitive. Infratil is appealing against the decision and if successful said it would try to buy Mana again, using its first right of refusal.

Family member Ian Waddell said Bancorp managing director Craig Brownie had made a direct approach to buy the company.

Mr Ritchie said Mana's value would diminish if Bancorp tried to sell its stake to any company other than Infratil. He questioned the price Bancorp paid given that $24 million would buy a fleet of 90 new buses.

Ritchies had considered setting up in Wellington, as it had done successfully in other cities. "Something like this possibly makes us feel like we should be considering it in a little bit more detail."

The Commerce Commission is comfortable with the sale as it "preserves the potential for competition".

Mana Coach Services is being eyed by at least four transport operators, including three from Australia, keen to enter the Wellington bus market.

The High Court at Wellington stopped New Zealand Bus, which owns Stagecoach in New Zealand, from buying Mana last month because the deal would substantially lessen competition. Mana and New Zealand Bus had not competed for contracts in each other's patch.

Mana's owners, mainly associated with the Waddell family, told the court they would sell the company to another operator if the acquisition by New Zealand Bus was barred.

Mana operates a fleet of about 110 buses, including urban, and touring and charter buses. Stagecoach Wellington has about 370 buses under several brands.

Three Australian companies gave evidence during a two-week trial --Transdev-TSL, Veolia Transport and Swan Transit. All said they would look to enter the market by acquiring an existing operator. Bidding for individual contracts was too risky because of the small size of the contracts, and the lack of information about passenger numbers, revenue, costs, depot locations, and staff availability.

The director of Christchurch-based Ritchies Transport, Andrew Ritchie, told the court that the company had been in the Wellington market for a long time. However, the contracts for subsidised bus services, typically for between 10 and 15 buses, were too small to come in as a new operator.

Ritchies is New Zealand's largest privately owned bus operator, with a fleet of more than 600 buses. It operates urban bus services in Auckland, Timaru and Marlborough. It also has charter, tour and long distance services, including the Intercity brand. Mr Ritchie said Ritchies would not necessarily compete with New Zealand Bus if it bought Mana.

Transdev-TSL executive general manager, Ross Mackiggan said that, if it bought Mana, its strategy would be to compete with New Zealand Bus and take market share. French-owned Transdev operates trams in Melbourne, buses in Sydney and ferries in Brisbane. It unsuccessfully tendered to form a joint venture with the regional council to buy Wellington's urban rail service from Tranz Rail in 2002.

Veolia Transport director Peter Lodge told the court that it would look to buy an existing operation with about 150 buses to enter the New Zealand market. Mr Lodge said the New Zealand market was characterised by high entry barriers, but those became an advantage once the company was established. Veolia was Australia's largest private transport operator, including buses and trains in Australia's main centres.

It also operates the Auckland rail services in partnership with the Auckland Regional Transport Authority.

Swan Transit director Neil Smith said his company was interested in the New Zealand market, but it would require a contract substantially larger than the maximum existing contract size of 22 buses in Wellington. Swan Transit operates 283 buses in Perth, 560 buses in South Australia and ferries in Brisbane.