STAGECOACH has sold its North American arm to US private equity investors in a deal that valued the operation at $271 million (£215m).

The Perth-based bus and rail group said the transaction with Variant Equity Advisors will allow it to reduce debt and to focus on growth opportunities in the UK.

News of the deal comes weeks after Stagecoach slashed the book valuation of the US business by £85m following a challenging first half.

The growth of low cost airlines has put pressure on firms that run inter-city coach services.

Stagecoach’s North America Division operates megabus.com inter-city coaches and services such as commuter buses, airport transportation and sightseeing tours. It is one of the largest ground transportation operators in North America with around 4,500 employees and more than 2,000 buses and coaches, according to Stagecoach.

In its interim results announcement earlier this month, Stagecoach noted profits at the North American business were running below target amid increased competition.

The company said then that it was reviewing strategic options which included a possible sale of the operation.

Chief executive Martin Griffiths said yesterday “The sale of our North American operations will allow management to focus more closely on the significant opportunities for growth in the UK.

“We have strong bus and rail operations in the UK where public transport has good prospects as the clear solution to the challenges of increasing road congestion and poor air quality.”

Mr Griffiths said Stagecoach had played a leading role in the development of public transportation in the US and Canada, which included reinvigorating the inter-city coach sector.

However, the group has faced big challenges since entering the US market via the £1.2 billion acquisition of Coach USA in 1999. It sold the bulk of that business to private equity firm Kohlberg & Company four years later after suffering hefty losses.

Stagecoach launched the no-frills megabus operation in the US in 2006, before buying back much of the business it sold to Kohlberg – Coach America – in a £101m deal in May 2012.

Revenues in the North American arm fell by three per cent to $323.3m in the six months to the end of October. Operating profits fell by 23%, to $21.2m, amid increases in fuel and staff costs.

The latest trading results were in line with those achieved immediately after the Coach America acquisition. Stagecoach had US revenues of $316.4m and profits at $21.7m in the six months to October 2012.

The company recorded a £85.4m non-cash charge in the first half in respect of the impairment of goodwill in the North American division. It said this reflected a revised view on the long-term profitability of the Division.

In its interim results announcement, Stagecoach said it had delivered an encouraging performance in its regional bus operations and was making progress on a range of commercial initiatives around marketing, ticketing, new revenue streams and on pricing.

The group said the competitive environment in the franchised London bus market was challenging but it saw opportunities to improve revenue and profitability over the longer term.

Stagecoach said it was well-positioned in UK rail, although the UK Government stripped the firm and partner Virgin Trains of the East Coast franchise in May after performance targets were missed.

Stagecoach runs the East Midlands Trains network and has a 49% share in Virgin Rail Group, which operates the West Coast rail franchise. It is involved in bids for three new franchises

Variant will pay $207m for the North American business, which had $64m net debt at October 27. The consideration includes a $65m deferred element.

Stagecoach shares closed down 2.6p at 135.2p.

On its website Los Angeles-based Variant says it focuses on pursuing corporate divestitures and other operationally-intensive transactions.

It says: “Our experience in these types of situations gives us the ability to find value in areas of the market that other investors overlook or view as out of favor.”