First Group begins sale of North American businesses after investor pressure
Bus operator First Group has today announced that it will sell its North American businesses after a long-running campaign by prominent investors finally paid off.
Coast Capital, an activist hedge fund with a 10 per cent stake in the firm, as well as British-Iranian property tycoon Robbie Tchenguiz, have been pressuring First Group to divest its intercity bus services in the US for nearly a year.
This morning the firm, which appointed Rothschild to advise on the sales process in December, commenced the formal process for spinning off First Student and First Transit, saying that it had received significant interest from a range of potential buyers.
On Monday Coast had recommenced attempts to secure the break-up of the business, which also runs rail franchises in the UK, saying that since announcing a strategic review in December the firm’s share price had declined 20 per cent.
Coast said that the North American operations, First Student and First Transit, are worth “notably more” than their book value of 100p per share, estimating a price of 165p for each.
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Chairman David Martin said that the sale was “the best way to unlock material value for all First Group shareholders”.
He added: “FirstGroup’s bus and rail businesses in the UK will play a key role in supporting the Government’s plans to stimulate economic growth throughout the country while reducing the environmental impact of transport.
“With the emphasis on building a stronger business for the future, they will continue to benefit from the improvement programmes already underway as well as from the Government’s infrastructure spending plans announced earlier this year”.
James Rasteh, a partner at Coast Capital, said: “This process has been long in the making and we are most pleased that First Group is now focused on releasing value for investors and allowing the disparate operations to pursue their best futures”.
The announcement was accompanied by a trading update from the company, which said that it had not seen a significant impact from the coronavirus outbreak so far.
Revenue at the transport firm has risen 7.5 per cent so far this year, the update said. Shares rose nearly two per cent this morning.