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National Express owner Mobico has struck a deal worth up to 608 million US dollars (£457 million) to sell its North American school buses, as it hands over the reins ahead of new tariffs driving up fleet costs.
The transport group said the sale to US infrastructure investor I Squared Capital is a “milestone” after battling to recover the division since the Covid pandemic.
Mobico operates more than 14,000 school buses in the US and is the second-largest player in the market.
It announced plans to sell the division at the end of 2023 and has been taking steps to improve its profitability, which took a hit during the pandemic and has been weighing on the company’s earnings.
Mobico said the school buses arm had been recovering from the impact and seen improvements including recruiting new drivers, reinstating routes, securing new contracts, and hiking prices.
But it has faced fresh challenges including drivers’ wages jumping and, more recently, potential fleet cost inflation from US tariffs.
US President Donald Trump earlier this month unveiled sweeping new levies on all imports to the country, including a 25% tariff on automobiles and parts.
Mobico said it expects to receive between 365 million US dollars and 385 million dollars (£275-290 million) upfront from the sale, after using the cash to reduce its debts.
It will therefore likely be “dilutive” to earnings in the short-term, meaning it will reduce the value of investors’ shares, while the company also warned it expects to deliver a “significant” loss for its full year.
Adjusted operating profits are also expected to come in at the lower end of the group’s guidance range.
Mobico’s share price plummeted by nearly a quarter on Friday morning following the announcement.
Nevertheless, Mobico’s chief executive Ignacio Garat said the agreement is a “significant milestone” and a “first step in strengthening the group’s balance sheet”.
He added: “The transaction follows a comprehensive process and reflects the work that has been carried out with the school bus management team to improve its performance over the last 18 months as well as the ongoing headwinds.”
Gautam Bhandari, managing partner at I Squared, said: “School transportation is more than just a daily commute. It’s a vital link to education, which underpins a functioning society regardless of stage in the economic cycle.
“We are proud to add this essential service to our portfolio and look forward to continuing to support its growth.”