Sir Angus jumps the bus

By Ian Fraser

Sunday Herald

December 26th, 2004


SIR Angus Grossart was on the Iraq-Syrian border “looking at Crusader castles” when he put together the deal of the year in Scotland.

Grossart, whose investment bank Noble Grossart coordinated the bid on behalf of the three other Scottish entrepreneurs, saw off a clutch of private equity houses to secure a takeover of the ailing bus-maker TransBus International.

The successful takeover, which took the market by surprise, was achieved through hourlyAlexander Dennis Enviro 400 phone calls between Grossart and fellow consortium members and colleagues.

“David [Murray] was in the South of France and Brian [Souter] was in London,” Grossart says. “And yet we were able to operate almost telepathically.

“It was a very interesting example of how Scotland, as a country, can benefit from cohesion. We were a very co-ordinated group, which was capable of being very decisive.”

Grossart, managing director of Noble Grossart, stresses that two things were critical: the element of surprise and its corollary, swift decision-making.

“The bottom line is that we had been aware of it [TransBus International] for some time. We had been tracking it, and when we moved, we moved very decisively.”

Grossart adds: “We had already put an indicative proposal forward – but there were a lot of other people around.”

This was why his consortium, made up of Murray, owner of Murray International Holdings and chairman of Rangers, and the Stagecoach founders Brian Souter and Ann Gloag, decided to bide its time before seizing the right moment to strike.

TransBus had been up for sale for most of the first quarter of 2004 following the collapse of parent group, Mayflower Corporation. But the auction, led by Mayflower administrators Deloitte, had hotted up by May.

At that stage, the reported shortlist of bidders including Montagu Private Equity, Dexter Capital Group (bidding alongside Electra Partners and Rutland Fund Management), US-based distressed debt specialist Cerberus Capital Management and Greencool, a Chinese company with bus interests.

But until that point there had been no mention of the presence of a Noble Grossart-led consortium. In fact, its involvement had escaped the media’s radar screen until the 11th hour, although there had been suggestions that Murray was involved in a bid. What had been reported was that a consortium led by Hugh Nash, a director of rival investment bank Noble & Company was sniffing around earlier in the auction.

On May 19 2004 it looked to some observers that Electra Partners, the London-based venture capitalists, was poised to walk away with the prize for around £36 million.

In reality, however, Deloitte’s administrators – including Edinburgh partner John Reid – lawyers and bankers were beavering away until 4.15am on May 20 in TransBus’s Larbert head office, and elsewhere, putting the finishing touches to a deal with the Noble Grossart-led consortium.

In the end, with debt finance from the Bank of Scotland, the consortium paid just £40m for a company with annual sales of £200m and a strong forward order book. It also pledged to put in a further £50m in working capital to get the business back on an even keel.

Grossart praises the speed with which BoS’s managing director of corporate banking, Peter Cummings, was able to reach critical decisions: “I generally think that with deals like this, there is a time to trade and a time to deal. When it reached the point where we were putting our cash on the table, we were able to cut through a lot of their conditions. In the final stages we moved with great alacrity.”

The Scottish consortium, which also benefited from the advice of Bill Cameron, a former TransBus chief executive, reportedly missed out on the “due diligence” stages of the auction process. But Cameron’s deep knowledge of the sector ensured this was not too big an obstacle.

Cameron has since been named as chairman of the renamed Alexander Dennis group, with Jim Hastie, the former professional footballer who helped turn around Glasgow-based Albion Automotive, being named chief executive.

If Electra partners or any of the other rival bidders had emerged triumphant, it would have been a bad day for Scotland, with what an industry expert describes as “one of the last bastions of the British motor industry, and the only one with a significant presence in the world markets” having a much less certain future.

Private equity owners would almost certainly have had a weaker commitment to maintaining TransBus’s Falkirk base and would also have imposed a tighter financial regime, expecting a quicker return.

Grossart says: “We are incredibly patient investors and always invest for the long term. Venture capitalists tend to be much more driven by short-term considerations and they would have squeezed it for income.”

Asked why the consortium believed that TransBus, which has been renamed Alexander Dennis to reflect its bus-making roots, was worth investing in, Grossart says: “We thought it could be fixed. But it will take time.”

Hastie and Cameron have had their work cut out. They have already shut down less productive parts of the business, including a body plant in Wigan, with the loss of 120 jobs.

Their biggest task, however, is to restore supplier and customer confidence as well as to reinstate customer warranties. Hastie says competitors had taken advantage of three months of uncertainty during the administration. “Some big, long-range orders were placed with rival companies.

“That was frustrating but you couldn’t blame customers.”

He adds: “The challenge was to put our own house in order, to produce quality products, demonstrate our commitment to the future and to do what we do best – build buses and fire engines.”

The pay-back is already coming. In December the restructured business announced new worldwide orders valued at around £70m. Hastie believes the new contracts mean Alexander Dennis has regained its position at the forefront of global bus-making, and saved 1300 jobs.

For Souter and Murray there was a degree of commercial expediency.

Souter clearly wanted to ensure security of supply of buses and spare parts for Stagecoach’s massive fleet of buses, while Murray sought to retain one of his metal firm’s key customers intact and in Scotland.

There was probably also a degree of altruism – or should that be nationalism – to this particular bid.

All the investors felt that the loss of such a significant manufacturing business, and one with such strong growth potential, would have been a bitter blow for the Scottish economy.

Copyright 2004 SMG Sunday Newspapers Ltd.

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