Sealink to acquire Transit for up to $700m

08/10/2019 - 08:13

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A privately-owned international bus operator that commenced operations in Perth in 1995 has struck a friendly merger agreement with SeaLink Travel Group, which operates the Rottnest and Swan River ferry services.

Sealink to acquire Transit for up to $700m
SeaLink's largest operations in WA are its ferry services to Rottnest Island.

A privately-owned international bus operator that began operations in Perth in 1995 has struck a friendly merger agreement with SeaLink Travel Group, which operates the Rottnest and Swan River ferry services.

ASX-listed SeaLink is a diversified transport and tourism business with the largest ferry operations in Australia, while Brisbane-based Transit Systems Group has grown to become the largest private operator of metropolitan bus services across the country.

SeaLink announced today it had entered into binding agreements to acquire Transit for an enterprise value of $635 million, plus a earn-out component of up to $63 million.

The deal also involves a management shuffle, with Transit chief executive Clint Feuerherdt to replace SeaLink's Jeff Ellison as chief executive of the combined business.

An investor presentation released by SeaLink today provided detailed insights into Transit’s WA business.

Transit generates $134 million in annual revenue from its WA bus services. This equates to 15 per cent of its total revenue.

Its five metro services, which it operates on behalf of state government agency Transperth, include the Midland area, which it has held continuously since commencing operations in 1995.

The initial contract win in Midland was followed by several other wins in Perth, before winning contracts in other states and overseas.

Transit disclosed it was preferred tenderer on three Perth bus services – Marmion and Claremont, which it currently holds, and Joondalup, which would be a new win.

The company said it was well placed to renew the Marmion and Claremont contracts because of its long-term relationships. It has held the Marmion contract for eight years and the Claremont contract for 17 years.

It also claimed to be outperforming on a number of key KPIs and have a limited history of disruption from industrial disputes.

Transit said it was also well placed to renew its Canning and Southern River contracts, which are due to expire in April 2020.

The company claims to hold about 40 per cent market share in Perth, with the balance held by two competitors - Keolis Downer subsidiary Path Transit and Transdev.

In regional WA, Transit holds contracts to operate bus services in Busselton, Bunbury and Albany.

As well as its WA operations, Transit operates metropolitan bus services in Adelaide, Sydney, Melbourne, London and Singapore.

Its new owner moved into the WA market in 2016 when it acquired Captain Cook Cruises for $12 million.

Nationally, SeaLink has 78 ferries, 76 coaches and 1,655 employees.

To partly fund the Transit Systems acquisition, SeaLink is raising a total of $154 million through dual placement and entitlement offers.

It will complete the purchase by issuing $269 million of SeaLink scrip to the vendors of Transit, as well as drawing down on new debt facilities.

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