FirstGroup tender offer as shareholders get £500m

Embattled Aberdeen-based bus and rail giant FirstGroup plc — currently searching for a new chief executive — said on Monday it plans to return £500 million to shareholders partly via a tender offer for their shares.

On July 22, FirstGroup said it increased its proposed return of value to shareholders to £500 million from £365 million now that the contentious £3.3 billion sale of its North American businesses First Student and First Transit to Stockholm-based investment firm EQT Infrastructure had completed.

On Monday, FirstGroup updated shareholders at its AGM on the return of the £500 million.

The Aberdeen firm said that if the full £500 million is not returned to shareholders via the tender offer, it intends to return any remaining surplus cash in a second phase “principally by way of a special dividend with an accompanying share consolidation” and supplemented by on-market share buybacks.

The company said: “Having considered various methodologies and consulted with a range of shareholders, the board has concluded that a tender offer is the optimal way to return such a significant amount in a short space of time, while giving shareholders who wish to retain their current investment in FirstGroup the option to do so.

“Under the tender offer, qualifying shareholders will be invited to tender some or all of their shares in the group at a price per share that will be announced at the time of launch.

“If the full amount is not returned to shareholders by way of the tender offer, the group intends to return any remaining surplus cash in a second phase, principally by way of a special dividend with an accompanying share consolidation, supplemented by on-market share buybacks.

“Implementation of the planned return of value will require approval by shareholders, and full details of the proposed tender offer, including the tender price, the timetable and instructions on how to participate, will be included in a tender offer circular that will be published and sent to shareholders in due course.”

FirstGroup also said First Bus passenger volumes have reached 65% of pre-pandemic levels on average in recent weeks and it expects this to increase further as the autumn terms for schools and colleges get fully underway.

FirstGroup chairman David Martin said: “Trading is in line with our expectations year to date, and we continue to support our passengers and other stakeholders as travel patterns evolve.

“While we complete the search for a new chief executive, my focus is on ensuring we continue to drive value from our strong positions in UK bus and rail, progress our plans to resolve our non-core Greyhound operation and complete the return of value to our shareholders following the sale of the North American contract businesses.

“The vital role of public transport is clear and the policy backdrop has never been more supportive.

“With a well-capitalised balance sheet and an operating model that will support an attractive dividend for shareholders commencing in 2022, I am confident that FirstGroup is well-placed to deliver sustainable value creation as a focused UK public transport leader.”

FirstGroup CEO Matthew Gregory will step down at the AGM.

FirstGroup’s biggest shareholder, New York-based hedge fund Coast Capital LLC, called for Gregory’s departure following the sale of First Student and First Transit.

Coast Capital had opposed the sale, arguing the price was too low.