Potential buyers were lining up this week after it emerged that Cardiff Council is considering the sale of a 40% stake in Cardiff Bus, one of the largest of the UK's few remaining council-owned bus operators.

The sale of a stake in Cardiff Bus, which operates a fleet of 225 vehicles and has an annual turnover of over £20m, follows the recent sales of ChesterBus and Blackburn Transport by their council owners.

All of the UK's major bus groups are likely to join the chase for the company. However, they are likely to face stiff competition from French groups Transdev, Veolia and Keolis.

The proposal to sell a stake in Cardiff Bus was put before council members last Tuesday by Cardiff Council chief executive Byron Davies. He said the move would bring in additional investment for the operator. He added that the council is also looking at rationalising or selling off other council assets in a similar manner.

A spokeswoman for the city council told Transit that the council is committed to transport infrastructure in the city and "as such is exploring the possibility of transferring a minority stake in Cardiff Bus to a third party in order to help realise significant investment in the business".

"This investment would help to ensure the onward growth of the business so that it continues to be an integral and dynamic part of the public transport network in the city while at the same time ensuring the council has the majority share in the business to protect the best interests of the citizens of Cardiff.

"Discussions are at a very early stage but both Cardiff Bus and Cardiff Council are committed to improving and working towards a transport system which will serve our fast growing and dynamic city for decades to come."

She said that the council would not comment on timescales for any sale. "We really don't know at this stage if it will go ahead," she added.

Cardiff Bus managing director David Brown said that the he recognised that a successful future for the business depended on partnership working, and any sale had to be in the best interests of Cardiff Bus customers, staff and for the city as a whole. "We note the council at this stage has stated this is a proposal for discussion only, and as such no commitments have been made," he added.

Cardiff Bus has gained a reputation in recent years for a series of innovations that aim to place the operator among the best. It has consistently invested in new vehicles, including a fleet of high-specification articulated buses, and has ambitious plans, instigated under Brown, to become one of the UK's best employers.

Pre-tax profit in the year to March 31, 2006, was a modest £93,000, due to the continued investment and increasing labour and fuel costs.

Recent sales of municipal operators have been dogged by controversy. This years's sale of ChesterBus triggered a battle in the High Court after Arriva launched new services competing with the company. ChesterBus was eventually sold to First Group.

First Group and Arriva, already major operators in Wales are likely to compete again for Cardiff Bus. Stagecoach, National Express and Go Ahead will also be interested.

However, there is a strong chance of the stake eventually being acquired by a French group, which are often regarded as taking a more positive approach to working closely with local authorities.

French groups already hold minority stakes in two municipal bus companies. Transdev has held a 17% stake in council-owned Nottingham City Transport since 2000 while Keolis has owned 20% of Eastbourne Buses since 2001. Bournemouth Council retains a 10% stake in Yellow Buses, which it sold to Transdev in 2005.

Another French group, Veolia, is also likely to bid for Cardiff Bus. The company has built a significant bus business in South Wales over the past two years.

Cardiff Bus is one of 14 remaining council-owned bus companies in the UK. Between them they operate a combined fleet of around 2,500 buses. The remaining municipals are: Lothian Buses (600 buses), Nottingham City Transport (360), Cardiff Bus (225), Reading Transport (200), Plymouth Citybus (190), Blackpool Transport (170), Warrington Borough Transport (130), Thamesdown Transport (120), Rossendale Transport (100), Ipswich Buses (95), Newport Transport (90), Halton Borough Transport (60), Eastbourne Buses (50) and Islywn Borough Transport (45).