Mobico Group Plc (LON:MCG) has announced that it has reached an agreement in principle for the sale of the net assets and operations of its West Midlands bus business to the West Midlands Combined Authority (WMCA) for expected upfront residual proceeds of approximately £24 million after deductions for transferred liabilities.
The Transaction is in line with the Group’s strategy to monetise its UK Bus assets, and substantially de-risks the Group from the forthcoming uncertainty of franchising in the area over the coming years.
· Headline asset value of approximately £102 million comprising primarily of the UK Bus depots and diesel fleet, broadly in line with book value, and £6.5 million of cash retained for operating purposes
· Total value deductions of approximately £78 million for the transfer of UK Bus liabilities, including primarily the UK Bus pension and the transfer of the electric vehicle contracts (based on current estimated market pricing), as well as additional recruitment and fuel hedging costs
· Expected upfront residual proceeds of around £24 million, subject to a customary completion accounts mechanism including a final revaluation of the pension liability
· Further deferred consideration of £5.5 million, with half payable at the end of 2027 and half payable on vacant possession of the Birmingham Central depot expected at the end of 2029
· Mobico is required to undertake an internal reorganisation prior to completion of the Transaction to transfer the assets and operations of UK Bus into a new legal entity (Newco) – the Transaction is expected to close around November 2026 (Completion)
· Over recent years the business has been heavily supported by local authority network funding and only delivered broadly break-even profitability, and the Transaction is therefore expected to be broadly neutral to earnings going forward and to 2026 covenant gearing
· The Group retains a net liability for historical insurance claims of approximately £5 million (as at 31 March 2026)
· The Transaction significantly de-risks the Group from the potential to lose market share in the forthcoming franchising process, crystallises value for its assets today broadly in line with book value, whilst providing a clean transfer of the Group’s operations, employees, cost base and other liabilities
· The Transaction provides WMCA with full control of the network, assets and operations of the business significantly de-risking and facilitating the path to franchising in the area
Phil White, Executive Chair of Mobico, commented:
“This agreement is another significant milestone in making Mobico simpler and stronger while substantially de-risking the Group. UK Bus has been break-even for a number of years and the uncertainty of future franchising in the area presented a significant headwind for the Group in managing the cost base and liabilities of the business going forward.
As the West Midlands moves toward a franchised network, WMCA is the logical buyer to facilitate that transition. The transaction represents fair value for the assets and liabilities of UK Bus while providing certainty for our colleagues upon completion.”
Background to the Transaction
The Group has operated the majority of urban bus services in and around the West Midlands for around 40 years. In that time the network and fleet have been significantly modernised, including the introduction of fully electric vehicles in recent years. Today the business runs approximately 1,400 buses, approximately 120 million passenger journeys and an annual service mileage of approximately 54 million miles.
In May 2025, the West Midlands approved the move from deregulated bus services to a franchising model in the area, with a transitional period running through to full rollout by the end of 2029, creating significant uncertainty for the long-term future of the UK Bus business.
Over recent years, the costs of running the business have also increased substantially and, in a funding-constrained environment, this has resulted in the business running at a broadly break-even level of profitability for a number of years as well as being heavily reliant on local authority network funding.
As such, Mobico took the decision to explore opportunities to monetise the assets of the UK Bus business whilst being mindful of its cost base and liabilities including its pension fund and long-term electric vehicle contracts. In light of this, WMCA was seen as a highly credible buyer for the business, including for its assets which would likely have been sold to WMCA over the coming years in the shift to franchising.
Further Transaction Details
The negotiated valuation reflects both parties’ assessment of the market value of the assets of the business (as at 30 September 2026, being the indicative Valuation Date), a deduction for the pension liability, an assessment of the current market value of the substantial electric vehicle contracts of UK Bus (in a market that has seen the cost of electric vehicles falling over recent years), and other deductions including additional recruitment and fuel hedging costs.
The deduction for the pension liability is to be effected via a cash injection into the pension fund based on the liability measured at 30 June 2026 and is subject to a final revaluation at Completion of the Transaction (but which is not expected to result in a further adjustment to the consideration). UK Bus is scheduled to make its next regular contribution into the pension fund of £9.5 million on 1 October 2026, which, if Completion of the Transaction is beyond this date as expected, would be added to the consideration and the injection into the pension fund reduced accordingly.
A customary completion accounts mechanism will be undertaken as soon as possible following Completion which is expected around November 2026. The completion mechanism includes a deduction for further depreciation for the period between the indicative Valuation Date and the date of Completion (but which should be broadly offset by positive cash flow generation in the same period).
Further contingent consideration of £9.9 million is payable to Mobico in the unlikely event that WMCA reverses or ceases actively progressing the move to franchising prior to May 2028.
For the 15 months to 31 March 2026, UK Bus generated revenue of £338 million, Adj. EBITDA of £23 million and Adj. Operating Profit of £2 million. Excluding the profit on disposal of assets (comprising primarily of two depots to WMCA in late 2025), UK Bus was marginally loss-making.
The net assets of the business as at 31 March 2026 were approximately £31 million including the retained cash and pension liability, which had an IAS19 net deficit of £53 million as at 31 March 2026. Newco will be held-for-sale in the Group’s next published balance sheet at a value reflecting the expected net proceeds from the Transaction, and any non-cash impairment calculated accordingly.
UK Bus is expected to be broadly break-even during 2026 through to Completion of the Transaction at an operating profit level.
The Transaction includes the transfer of IFRS16 lease liabilities (included in the Group’s reported net debt) of approximately £25 million (as at 31 March 2026) with no value adjustment.
The Group retains a net liability for historical insurance claims of approximately £5 million (as at 31 March 2026).
