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ML111

Sightseeing joint venture in New York

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18/03/2009

 

Stagecoach Group plc ("the Group") is pleased to announce that today it entered into an agreement to create a new joint venture to operate the sightseeing services of the Group's Gray Line New York business and the business of CitySights NY.

 

The Group's North American Division operates a successful sightseeing business in New York City, trading as Gray Line New York. Gray Line New York operates double decker bus, motorcoach and trolley bus tours of New York City and the surrounding area as well as other related services.

 

The Group has agreed to enter into a joint venture with CitySights NY, which also operates sightseeing bus services in and around New York City.

 

The Group and CitySights NY will contribute vehicles, licenses and certain other assets to the Joint Venture. In return, the Group will hold 50% of the voting rights and 60% of the economic rights in the Joint Venture with CitySights NY holding the remaining voting rights and economic rights.

 

The Joint Venture, Twin America, LLC, is expected to commence trading from 31 March 2009.

 

The new Joint Venture will operate services under both the Gray Line and CitySights brands and will be the leading provider of sightseeing bus services in New York. A Board of Directors, including representatives from both shareholders, will oversee the Joint Venture. Mark Marmustein will be the Chief Executive Officer of the Joint Venture and will lead the day-to-day management of the business.

 

The Joint Venture will deliver a number of benefits:

 

Customers will benefit from a good quality, high value, and better co-ordinated service with a range of products to choose from.

A better co-ordinated service should reduce road congestion at certain points and enhance the value of the tours.

The Joint Venture will benefit from cost savings and other synergies that arise from combining the two existing businesses to the extent permitted by existing contractual arrangements and other business considerations.

The gross assets that the Group will contribute to the Joint Venture had a net book value of US$22.5m at 28 February 2009 and the gross assets that CitySights NY will contribute to the Joint Venture had a net book value of US$6.1m at 28 February 2009. In addition, US$45.1m of the Group's reported goodwill relates to Gray Line New York.

 

For the year ended 30 April 2008, Gray Line New York contributed US$17.3m to the Group's operating profit. For the 12 months ended 31 January 2009, CitySights NY reported an operating profit of US$8.7m. More recent trading in the New York sightseeing market has been adversely affected by poor economic conditions and a weaker tourist market characterised by reduced hotel occupancy rates and lower airline traffic.

 

The Group will present its 60% share of profit after tax from the Joint Venture in its consolidated income statement and the operating profit of the Group's North American Division will no longer include the operating profit of the Gray Line New York operations.

 

Brian Souter, Chief Executive, Stagecoach Group, said: "We are delighted to have created a partnership of two powerful brands that will be the leading provider of sightseeing services in New York.

 

"This new joint venture will allow us to deliver a more coordinated service to our customers, who will have access to a high-quality, good value range of sightseeing products. Both businesses will also benefit from a number of synergies, which will make our collective operations more efficient and give us a strong platform for the future."

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If i ever get my tour biz going i may partner with these guys. Interesting news!

 

- A

 

If I were you, if you were to start it up in the near future, I would hold off at least 2 years on it, what drove CitySights and Gray Line NY together to these straits is that tourism and expenditures in sightseeing within the city have dropped considerably because of the economy - as a little tid bit for you, Gray Line NY lost a good 15-20% of revenues as compared to this time last year - this was out of survival that both companies did this...

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If I were you, if you were to start it up in the near future, I would hold off at least 2 years on it, what drove CitySights and Gray Line NY together to these straits is that tourism and expenditures in sightseeing within the city have dropped considerably because of the economy - as a little tid bit for you, Gray Line NY lost a good 15-20% of revenues as compared to this time last year - this was out of survival that both companies did this...

 

I know. :cool:

 

- A

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