Disposal of London Bus operations

23 June 2006

Stagecoach Group plc (“Stagecoach”) is pleased to announce that it has agreed to sell its London bus (“Stagecoach London”) operations to Macquarie Bank Limited (“Macquarie”). The sale is subject to regulatory approval and other closing conditions, and at the present time Stagecoach anticipates that the sale will complete within three months.

The total proceeds for the sale are £263.6m in cash, subject to adjustments dependent on the net assets of Stagecoach London at completion.

Stagecoach’s consolidated gain on disposal is estimated at £120.0m although the gain will depend on the final determination of the net assets of Stagecoach London at completion of the sale. The gross assets subject to the transaction were approximately £171.2m as at 30 April 2006.

Stagecoach London comprises two companies that provide bus services on routes within and from London, principally under contract from Transport for London.

The unaudited profit before tax for the year ended 30 April 2006 from the assets subject to the transaction was £17.9m. Stagecoach London is estimated to account for approximately £224.6m of the unaudited revenue and £23.6m of the unaudited operating profit of Stagecoach’s UK Bus division for the year ended 30 April 2006. The operating profit is exclusive of any allocation of UK Bus divisional overheads.

Stagecoach London will establish a new defined benefit pension scheme.

The liabilities of the Stagecoach Group Pension Scheme attributable to Stagecoach London members will be transferred to the new scheme. A proportion of the assets of the Stagecoach Group Pension Schemes will also be transferred to the new scheme. Stagecoach will make additional cash contributions as part of these arrangements (estimated at £60.0m).

The deficit of the Stagecoach Group Pension Scheme (as measured on the basis of Financial Reporting Standard 17 before taking account of deferred tax) will reduce by an amount approximately equal to the additional cash contributions.

The proceeds of the disposal, after making the additional pension contributions, will initially be used to reduce borrowings.

The management team of Stagecoach London led by Nigel Barrett (Managing Director Designate) will remain with Stagecoach London under its new owner.

Stagecoach’s business strategy remains focused on organic growth in its bus operations, exploring the potential for complementary bolt-on acquisitions, and selectively targeting new rail opportunities to deliver further value to shareholders.

Following the disposal, the UK Bus division will focus on the bus market outside London where it is pursuing a successful growth strategy. Over the ast year, Stagecoach has completed the acquisition of significant bus operations in Merseyside, Yorkshire, Lincolnshire and Tayside. The Group believes the UK bus market outside London has scope for further growth in an environment where Stagecoach can capitalise on its industry leadership, entrepreneurial flair and innovation.

Brian Souter, Stagecoach Group plc Chief Executive, commented: “The London bus operations have been a highly successful part of Stagecoach’s UK Bus division since 1994. After assessing Macquarie’s offer and the prospects for the London bus operations, we concluded that the disposal was in the best interests of our shareholders.

“The sale of the London bus business will allow us to focus on our successful UK bus growth strategy outside London, where we have demonstrated our strength in delivering innovation, investment and strong marketing. We will continue to look for further organic growth and bolt-on acquisition opportunities in our UK and North American bus business and opportunities to grow our rail portfolio.”

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