FirstGroup looks set to become the largest operator of yellow school buses in America, after agreeing a $3.6 billion (£1.9 billion) deal to buy Laidlaw.

The British transport group will have a 14 per cent share of the schools market once it completes the deal for the US transport group. The acquistion will also see FirstGroup take control of Greyhound, the long-distance coach service.

The agreed deal will add to FirstGroup's existing North American business: its First Student division is already a large operator of yellow school buses in the United States, with a particular focus around Seattle, Chicago and New York. Other units provide vehicle maintenance services and airport shuttle and other transport services.

Martin Gilbert, the UK group's chairman, said: "This acquisition marks an important new phase in the development of the group's business. As a consequence of the strengthening of our North American activities, we weill create additional value for our shareholders."

The company believes it can take out costs of $70 million in its first year of ownership.

FirstGroup said this morning it would raise £200 million in a placing of new shares, with plans for a further placing worth £175 million in the future, to fund the deal.

The sale of Laidlaw comes five years after Kevin Benson was appointed chief executive of its predecessor company, which had filed in 2001 for Chapter 11 bankruptcy protection. Laidlaw emerged from bankruptcy protection in 2003.

The group was originally founded as a Canadian trucking company in 1924. The buses group is now headquartered in Chicago.

Times Recommends

• Food prices rise 8.3% on soaring fish and meat
• Car sales crash as economy hits skids
• House prices fall but Bank leaves rates on hold