Stagecoach takeover could mark end of a profitable era for bus and train tycoons

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Stagecoach takeover could mark end of a profitable era for bus and train tycoons

The fortunes of Brian Souter’s firm seem to have closely followed those of privatised public transport in the UK

Souter, right, with Richard Branson at the launch of the high-speed Pendolino train in 2002.

Sun 26 Sep 2021 07.00 BST

It is testament to their dwindling empires that the proposed merger of Stagecoach and National Express, the UK’s biggest rail and bus operators not so long ago, will not unduly trouble the competition authority.

Stagecoach, which a decade back looked to swallow up National Express, now is set to be subsumed by its rival. The turnaround in its fortunes has been influenced by foreign ventures, and the pandemic has magnified all of its problems. But the firm’s journey has notably followed the arc of privatised public transport in Britain.

Launched as a fledgling bus operator in 1980, Sir Brian Souter’s Stagecoach rode the wave of opportunity that came its way after Thatcher’s deregulation of the bus industry in 1986. It became a dominant player in many regional markets, where cherrypicked routes allowed it to run at handsome margins – to the increasing disquiet of customers and local councils.

After rail was privatised, Stagecoach was the first operator to open a service – and then joined forces with Sir Richard Branson to run Virgin Trains, one of the great exemplars of the new regime: arguably improving customer service, innovation and passenger numbers – and indisputably reaping whopping dividends from the west coast mainline.

With rail apparently growing inexorably, the Scottish operator took a 90% stake in a new Virgin venture to win and run the east coast rail franchise in 2015, a long-targeted prize that saw its value peak. But that proved a disastrous miscalculation: Stagecoach pulled the plug as losses mounted, and the line again returned to state control.

National Express, of course, had already been there: overbidding to run the franchise and forced to hand back the keys in 2009, when it looked like the firm could be prey for Souter. Perhaps it was fortunate to see the warning signs earlier, and focus on overseas expansion instead. It exited UK rail with the sale of C2C in 2017 – and in the boardroom, flogging the franchise to the Italians was soon seen as one of the best bits of business ever pulled off.

In its local bus operation, National Express also appeared to run increasingly with the grain. When transport authorities and politicians in Newcastle and Manchester lobbied for reform to rein in the “wild west” in which bus firms flourished, Souter threatened to “drink poison” rather than sign up to agreements. But calls for regulation were absent in the West Midlands, where National Express dominates; partly down to the mayor’s politics, but also the firm’s cultural acceptance of the kind of local authority partnership that Stagecoach has mistrusted, if not actively opposed.

Regardless, both are now beholden to the state, which has underwritten lost revenue in bus operations since the pandemic took passengers away. Rail, meanwhile, has been effectively nationalised due to coronavirus – deciding beyond doubt that franchising had become untenable.

While Souter had for some time been edging away – stepping down as chairman two years ago, and starting to sell off his shareholding – it is perhaps a fitting moment should the Stagecoach name become history. His past campaigning in Scotland to keep the section 28 clause that prevented teachers “promoting homosexuality” still made the brand toxic for many, no matter how many rainbow buses Stagecoach has launched since.

The plummeting value of Stagecoach means Souter’s wealth, along with that of his sister and Stagecoach co-founder Ann Gloag, is now “just £650m”, according to the Sunday Times rich list – with some £100m given away over the years in charitable donations, for which many may be grateful. Passengers, who have seen rail fares rocket and local bus services wither, may also hope this signals the end of a chapter when a few could profit so enormously from an essential public service.

Netflix and the giant Roald Dahl deal sounds a compelling tale

A Roald Dahl book is sold somewhere in the world every 2.6 seconds, a statistic not lost on Netflix, the new owner of the late author’s work. Content is king in the battle for global streaming supremacy. Franchises that are guaranteed to be hits with viewers are becoming ever more sought-after, scarce, and valuable – Netflix spent $1bn on a licensing and production deal with Dahl’s estate in 2018 before upping the ante to buy the back catalogue outright last week.

Netflix hopes that the author’s print popularity is a perfect match for its global content machine. Dahl has worldwide popularity, with 300m copies sold in 63 languages to date, and even though some of his classics, such as James and the Giant Peach and Charlie and the Chocolate Factory, were written as long ago as the 1960s, the storytelling has remained evergreen.

As rival streaming services have challenged Netflix’s dominance, many of its biggest hits, including the Marvel films, disappeared as their rights owners took back control of their best assets. Netflix is now being forced to build its own content empire via big-money deals with top talent, from Grey’s Anatomy creator Shonda Rhimes to movies starring A-listers such as Ryan Reynolds.

Starting in the mid-00s, Disney spent a bargain $15bn adding to its stable of classic family hits by buying Pixar, the Marvel superhero universe and the Star Wars-maker Lucasfilm. Then another $66bn on Rupert Murdoch’s Fox empire, including content from The Simpsons to Avatar. Meanwhile Amazon has spent $1bn bringing JRR Tolkien’s Lord of the Rings to the small screen, while HBO Max has global hits from Friends to DC Comics franchises.

Netflix splashes out $17bn a year trying to create must-watch TV shows and films, many of which sink without a trace. In that light, paying £500m or so for Dahl’s proven treasure trove looks a bargain.

Westminster shuffle could deal gambling firms a losing hand

While the $22.4bn (£16.4bn) bid for Ladbrokes owner Entain was the most eye-catching development in the gambling world last week, more significant machinations were taking place in Westminster.

The UK government is in the midst of a review that could completely reshape the legislative landscape governing the world’s largest regulated gambling market. It was already a short-odds bet that gambling logos on football shirts were for the chop. People familiar with draft versions of a white paper due before the end of the year now suggest this is all but a done deal.

More could be to come. A reshuffle has put new personnel in charge of finalising the gambling review, with Nadine Dorries replacing Oliver Dowden as culture secretary. Dorries has not been outspoken on gambling but her ally – Tory commentator Tim Montgomerie – has frequently voiced distaste for the industry.

The departure of John Whittingdale as junior minister with direct responsibility for the review is also significant. Whittingdale had been seen as soft on gambling, having once played down the dangers of fixed-odds betting terminals (FOBTs), roulette machines that were later dubbed a “social blight” by his own government. His successor as gambling minister, Chris Philp, wholeheartedly backed reducing the maximum stake on FOBTs from £100 to £2.

If football sponsorship is up for debate, Philp and Dorries might well consult Tracey Crouch, who is leading a review of the game. The former sports minister was the architect of the FOBT cut and will be mindful of gambling’s funding for football but also its saturation of it. The political stars, it seems, are aligning.

The danger for gambling reformers is that ministers focus on football shirts at the expense of less headline-grabbing reforms, such as curbing online slot machine stakes, or affordability checks to stop punters plummeting to financial ruin.

The danger for gambling firms is that Westminster is briefing about football shirts now because it has something much more far-reaching up its sleeve to surprise and delight the crossparty coalition avid for stricter regulation. The roulette wheel is spinning.

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