FirstGroup starts $4bn sale of North American units

By Mark McSherry

Aberdeen-based global bus and rail giant FirstGroup plc said on Wednesday it has started a formal process to sell its North American contract businesses First Student and First Transit.

FirstGroup said there has been “significant interest expressed by a range of potential buyers.” Analysts have speculated the units could be sold for up to $4 billion.

First Student and First Transit reported combined revenues of $3.8 billion for the financial year ended March 31, 2019 and combined EBITDA for the same period of $558 million.

Meanwhile, FirstGroup said negotiations for the sale of its Greyhound bus business “are ongoing and we will update the market, as appropriate, when they conclude.”

FirstGroup added: “Significant interest in the North American contract businesses has been received, and Rothschild & Co, together with Goldman Sachs and JP Morgan Cazenove, have been appointed to lead a sale process.

“Under the leadership of our chairman, David Martin, the group has now undertaken thorough preparations for a carve-out and sale of First Student and First Transit.

“This work has involved expert third party consultants and advisers who have helped design the optimal structure to be implemented and put together the detailed materials and reports appropriate for a transaction of this scale.”

The news was contained in an update on trading since the end of September 2019 that said group revenue is up 7.5% year to date.

The Aberdeen company said UK-based First Bus and First Rail will form the core of the ongoing group following the sale of the North American units, and “there are no further plans” to pursue a separation or sale of First Bus.

“We will continue to actively manage First Rail’s existing portfolio of rail franchises to deliver sustainable benefits for passengers, shareholders and our other stakeholders,” said the group.

“We also look forward to the publication of the Williams review, which we hope will provide much anticipated clarity around the future shape of rail franchising.”

FirstGroup chairman David Martin said: “We have now commenced a formal process to sell our North American contract businesses.

“We firmly believe that a sale of these assets is the best way to unlock material value for all FirstGroup shareholders, having completed a detailed review and analysis with advisers appointed by the board to explore all options.”