BBC News Online: Business: The Company File

Stagecoach climbs aboard Virgin Rail

Stagecoach is paying a total of £158m for the stake in the group from the venture capitalists who helped fund Mr Branson's purchase of several train operating companies as part of the privatisation of British Rail.

Virgin Rail runs the West Coast Mainline service. It plans a huge investment in the line over the last few years which will involve introducing tilting trains. Virgin also runs the Cross Country rail service.

It has been widely reported that Virgin Rail was seeking a flotation on the stockmarket to help pay for its heavy investment programme. Virgin will now shelve these plans for the time being following the intervention of Stagecoach.

The deal will consolidate Stagecoach's position as one of the biggest players in Britain's rail industry. As well as running trains in the South West and the Isle of Wight it was behind the controversial acquisition of Porterbrook, the train leasing group, that created a new breed of rail 'fat cats'. The group is also one of Britain's largest bus operators.

The shareholder structure of Virgin Rail will be restructured so that Mr Branson's group will continue to hold a majority stake in the business.

Brian Souter, chairman of Stagecoach who first contacted Mr Branson about a deal said: "The two companies are dedicated to building modern and effective integrated transport systems and both companies are investing significant sums to achieve this aim."

Richard Branson said: "I'm still looking forward to the day we can grass over the motorways. This deal has enabled Virgin to gain control of Britain's most important national rail franchise and at the same time continue upgrading and developing with a new partner, Brian Souter."

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