FirstGroup hires advisors to sell £2.6bn US businesses

UPDATE 3 — Aberdeen-based global bus and rail giant FirstGroup plc, under pressure from activist investors, said on Monday it appointed advisors to “formally explore all options” including a potential sale of its North American school bus and transit divisions.

The announcement, which sent FirstGroup shares up about 6%, is part of a break-up strategy that already includes a planned sale of FirstGroup’s Greyhound bus business.

Bloomberg reported FirstGroup has appointed Rothschild to advise on the sale of its First Bus and First Transit divisions.

The units could fetch more than £2.6 billion, according to analysts.

Activist shareholders Coast Capital Management and Robert Tchenguiz have been fighting for a breakup of FirstGroup since the Aberdeen group rejected a takeover bid from Apollo Global Management last year.

FirstGroup has grown to become a global business with about £7 billion in revenue and 100,000 employees. It transported 2.2 billion passengers last year.

In a stock exchange statement, FirstGroup said: “The board of FirstGroup has been clear that its intent is to realise value for shareholders and that it will actively manage the entire portfolio by all appropriate means.

“Since his appointment as chairman four months ago, David Martin has been actively engaged across the entire portfolio, working with management and supported by independent advisors, to review the various strategic options.

“Following this review and having further validated whether the monetisation of these businesses would deliver material value enhancement for all shareholders, the board has appointed advisors to formally explore all options in respect of our North American contract businesses, First Student and First Transit, including a potential disposal.

“At our recent half-year results the group updated on progress including the strengthening of its rail business with the addition of West Coast Partnership, progressing the sale of Greyhound and the development of a framework for the First Bus pension scheme.

“We are actively addressing the cost base of First Bus through a comprehensive efficiency programme, the results of which will be substantially more evident in the second half of the year and beyond.

“Therefore, the board determined that greater value will be achieved by delivering this margin enhancement prior to any launch of a formal sale process.

“In the meantime, we continue to focus on the individual plans for each of our businesses, ensuring that customer commitments, investments, as well as growth and margin improvement plans are delivered.

“We will keep the market updated on progress as appropriate.”

FirstGroup CEO Matthew Gregory said: “We have taken a number of important steps that will enable a rationalisation of the Group’s portfolio.

“Today’s announcement to formally explore all options to maximise value from our North American businesses reflects the resolute focus of the entire board on realising value for all shareholders.’