By Mark McSherry
Aberdeen-based bus and rail giant FirstGroup plc said on Friday it agreed to sell North American businesses First Student and First Transit to Stockholm-based investment firm EQT Infrastructure in a £3.3 billion billion deal.
The transaction, which sent FirstGroup shares about 9% higher, follows long-standing pressure on the transport group from some big shareholders to retreat from its international expansion.
FirstGroup said the transaction allows it to make a £336 million contribution to its UK defined benefit pension schemes “and address other longstanding liabilities” including those relating to its Greyhound bus business, which is not included in the deal but remains up for sale.
“Greyhound remains non-core and the group continues to pursue all exit options for it while de-risking its liabilities and actively managing its substantial property portfolio for value,” said FirstGroup.
The Aberdeen-based group said £1.34 billion from the deal will to be used to reduce debt, including a £300 million Covid Corporate Financing Facility repayment to UK Government, and to derisk other liabilities “including for North American legacy pensions.”
FirstGroup said it is proposing to return £365 million to shareholders — 30p per share — during the current calendar year with “potential for further distributions to shareholders in due course, including following resolution of Greyhound …”
The transaction is subject to FirstGroup shareholder approval.
On recent trading, FirstGroup said it expects adjusted operating profit for the 2021 financial year “to be ahead of management’s previous expectations” and said its current liquidity is in excess of £900 million.
FirstGroup CEO Matthew Gregory said: “We are pleased to have agreed the sale of First Student and First Transit in a transaction which recognises their full strategic value.
“Both are resilient, high quality businesses with strong prospects for returning to normal levels of service following the pandemic.
“Our colleagues at First Student and First Transit have built excellent relationships with their customers over many years, and we are proud of their commitment and expertise.
“I would like to pay tribute to everyone in these businesses and acknowledge the vital role they play in their communities, both now and for many years to come.
“As economies begin to emerge from the pandemic restrictions and society begins the process of building back better, the vital role of public transport is clear.
“The services we provide are critical to economic activity and social objectives including ‘levelling up’, and play an important role in combating climate change and helping local communities flourish.
“Going forward, FirstGroup will be a more focused, resilient business that is in a strong position to deliver for bus and rail passengers in the UK, continue investing in its zero-emissions fleet strategy and play a key role in meeting society’s broader ESG goals.”