The agreement is a non-cash transaction, with ComfortDelGro issuing Stagecoach with shares worth 35 per cent of Scottish Citylink.

In exchange, Citylink assumes the rights to Stagecoach's Motorvator and Megabus intercity operations in Scotland, and for cross-border services between Scotland and England. ComfortDelGro retains the remaining 65 per cent of Scottish Citylink's share capital.

The venture will operate under the Megabus.com and Scottish Citylink brands, with Stagecoach overseeing management of the new business.

"These are two strong brands," says Stagecoach finance director Martin Griffiths. "By leveraging them together we will provide a more efficient service and greater choice for our customers," "The venture gives us a chance to develop the business in Scotland in the interests of all parties and our customers."

Stagecoach's UK bus operations produced an operating profit of £82.5m for 2005, 11.5 per cent of the group's turnover for the year. The company expects the new joint venture to be worth a further £18m in annual revenues.

Stagecoach also recently announced that on September 30, it will redeem all B shares in the company at a value of 18 pence per share. Some £250m will be paid out to shareholders when the shares are cancelled.