The council said it could no longer afford to invest in the firm
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Drivers of Bournemouth's Yellow Buses staged a demonstration on Wednesday evening in protest at the firm's proposed sell-off.
Yellow Buses, which is run by Bournemouth Transport Group, a firm owned by the borough council, employs about 300 staff.
Drivers are angry that the council cabinet agreed in December to sell the company to raise extra funds.
The authority also said it could no longer afford to invest in the firm.
'Higher fares'
Earlier, James Wall, from the Transport and General Workers' Union, said: "We are concerned about job security and job conditions as far as the staff are concerned.
"But for the public it could mean a whole lot of things like higher fares and council tax increases because a private company would want a greater subsidy to run the social routes - the ones that don't make a lot of profit."
But Bournemouth Borough Council said it is trying to make the change as painless as possible.
Councillor Adrian Fudge said: "One of the things we've stressed to any bidders is that they must look to the pension fund especially, for the employees and to their rights.
"And also what they're going to provide for the people of Bournemouth."
Yellow Buses is one of only 17 bus companies in the country remaining in some form of council ownership.
The Transport Act 1985 required local authorities to either sell them off or transfer them to firms to run them on their behalf.