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Aberdeen transport giant knocks back £1.2bn-plus takeover approach

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FirstGroup has rebuffed a takeover approach potentially worth more than £1.2 billion.

The Aberdeen-based transport giant said the proposed initial cash payment of £1.18 per share from private equity company I Squared Capital Investors “significantly” undervalued its continuing operations and future prospects.

And the prospect of a further “contingent right” to 45.6p per share “does not provide shareholders with sufficient certainty”, FirstGroup added.

The latter payment is dependent on the outcome of an “earnout” linked to the sale of FirstGroup’s FirstTransit subsidiary in North America, as well as net proceeds realised from “legacy assets and liabilities” of the FTSE 250 firm’s former Greyhound business.

There was a near-9% rise in the value of FirstGoup’s shares on May 26, after the news of I Squared’s interest broke.

At today’s market close, the stock was down by 1.24% at £1.35.

A family getting on a train at South Western Railway
FirstGroup’s South Western Railway operation.

A statement from FirstGroup to the London Stock Exchange said: “The board, having carefully evaluated the proposal together with its advisers, concluded that the cash component of 118p per FirstGroup share significantly undervalues FirstGroup’s continuing operations and its future prospects.

“The contingent right to up to 45.6p per FirstGroup share does not provide shareholders with sufficient certainty.

“Accordingly, the board has unanimously rejected the proposal.”

A First bus with the destination of Dyce via City Centre

The company expects to announce its results for the year ended March 26 2022 next Tuesday.

I Squared, operating from offices in London, Hong Kong, Singapore, New Delhi and Miami has made previous approaches, all of which have been rebuffed.

Under City takeover rules, the private equity house has until 5pm on June 23 to “put up or shut up” – to either announce a firm intention to make an offer for FirstGroup or walk away.

A FirstGroup yellow school bus
First Group sold its First Student “yellow school bus” business in North America.

FirstGroup announced last July it had completed the sale of North American businesses First Student and First Transit.

The two businesses were acquired by Swedish private equity company EQT Infrastructure in a deal worth £3.3bn.

In October, FirstGroup said it had sold Greyhound – the iconic coach business connecting cities across North America – drawing its ownership to a close after 14 years.

A Greyhound coach in a sunny landscape
The company also offloaded its iconic Greyhound business.

The £125 million sale to Germany’s FlixMobility more than two years after the division was put up for sale ended FirstGroup’s interests across the Atlantic, leaving it to focus on its UK bus and train operations.

I Squared’s latest attempt to bolster its global infrastructure investments, comes just a few months after FirstGroup unveiled Graham Sutherland as its new chief executive.

Mr Sutherland, who previously held a number of leadership roles in the telecommunications sector, started his new job last month.

FirstGroup chief executive Graham Sutherland
New FirstGroup chief executive Graham Sutherland.

Former CEO Matthew Gregory announced his departure last June after he and the rest of the board faced criticism from the country’s largest shareholder, US hedge fund Coast Capital.

Coast and other investors were unhappy over the sale of First Student and First Transit, claiming the deal left them short-changed.

North-east entrepreneur Sir Moir Lockhead led an employee-management buyout of Grampian Transport in 1989 to form FirstGroup.

Sir Moir Lockhead standing with a FirstGroup bus outside the Marischal College
Sir Moir Lockhead.

The company is now the second largest regional bus operator in the UK, carrying hundreds of thousands of passengers a day.

Its First Bus division serves two-thirds of the UK’s 15 largest conurbations, including major urban areas such as Aberdeen, Glasgow, Bristol and Leeds, with one-fifth of the market outside London.

First Rail is the UK’s largest rail operator, with many years of experience running all types of passenger services. The division has four UK Government-contracted operations – Avanti, GWR, SWR, TPE – and also runs two open-access operations, Hull Trains and Lumo.

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