The Go-Ahead Group Plc and OK Motor Services Limited:
A report on the merger situation
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In a reference dated 8 September 1995 (see Appendix 1.1) the Secretary
of State for Trade and Industry asked us to investigate and report on
the acquisition by The Go-Ahead Group PLC (Go-Ahead) of OK Motor Services
Limited (a bus operator, referred to in this report simply as OK), OK
Motor Services (Travel) Limited (a travel agency and tour operator), and
OK Travel (Inclusive Tours) Limited (a coach tour operator) for a consideration
of £5.4 million.
The reference area consists of the counties of Tyne & Wear, Durham,
Cleveland and four adjacent districts or parts of districts in Northumberland.
At the time of the merger in March 1995, Go-Ahead was the second largest
bus operator in the reference area with a market share of 29.2 per cent.
It operated chiefly in Tyne & Wear and north Durham. OK was the fifth
largest operator with a market share of 5.4 per cent. It operated widely
throughout the reference area, with a majority of its services being in
south Tyne & Wear and Durham.
The bus market in the reference area is dominated by four large national
operators (including Go-Ahead), the others being Stagecoach Holdings plc
(Stagecoach), which has the largest market share, National Express Group
PLC (National Express) and British Bus PLC (British Bus). Following the
merger these four operators together have a 95 per cent share of the market
in the reference area. Each operator has a core territory within which
it is dominant and this limits competition between them. However, the
territories overlap and there is competition on the main corridors served
by Go-Ahead. Within Tyne & Wear competition is also provided by the
Metro and the Newcastle-Sunderland railway.
The merger has resulted in a slight loss of competition for commercial
bus services. However, we believe that the competition Go-Ahead continues
to face from other bus operators and, on parts of its network, from other
modes of transport such as the Metro will be sufficient to prevent this
loss of competition with OK from producing adverse consequences for bus
users. We also expect that the level of competition between major bus
operators in the reference area will increase in future, at least to a
limited extent, as a consequence of reduced opportunities to expand by
acquisition. This increased competition will offset the loss arising from
The merger has also resulted in a loss of competition for tendered services.
However, we consider that the number of potential competitors for tendered
services remains sufficiently large that it would not be right to conclude
that the loss of OK would in itself have a direct impact on tender prices.
In addition, as OK was in a financially weak state, its loss as an independent
competitor would probably have occurred in the absence of the merger.
The merger will bring some benefits, including efficiency savings arising
from the combined operation of Go-Ahead and OK, greater inter-availability
of tickets and improved passenger information.
We do not consider that the acquisition by Go-Ahead of OK Motor Services
(Travel) Limited and OK Travel (Inclusive Tours) Limited will have any
impact on the travel agency and coach tour markets in the reference area.
In view of these considerations we conclude that the merger does not
operate and may be expected not to operate against the public interest.
One member of the Group, Professor Pickering, disagrees. His views are
set out in a note of dissent following Chapter 2.
Summary and Conclusions
Background and evidence
||Background, the companies and the merger
||The market for local bus services in the reference area
||Views of the main parties
||Views of third parties
||List of signatories
|(The numbering of the appendices indicates
the chapters to which they relate)
||The reference and background
||OK: balance sheet summary-restated figures
||OK: profit and loss summary showing restatements
||OK: financial ratios-restated figures
||Bus and coach age distribution (vehicles with nine or
||Go-Ahead organization charts
||Go-Ahead: balance sheet summary
||Go-Ahead: profit and loss summary
||Go-Ahead: financial ratios
||Interim undertakings given by Go-Ahead on 20 September
||Draft undertakings in lieu of reference to the MMC, 1
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