Mobico: National Express owner’s school bus deal leaves much to be desired
National Express owner Mobico has at long last agreed a deal to flog off its struggling North American school bus division.
The London-listed bus and coach firm on Friday unveiled plans for a £457m sale to the US infrastructure investor, I Squared Capital.
Its school bus segment had weighed on shares since the pandemic amid a combination of lower-than-expected revenue and higher costs due to driver shortages.
Most analysts agreed a sale would make sense, and Mobico had announced its intention to pursue a deal as far back as October 2023.
Its board were unanimously behind the transaction, which is expected to make upfront net proceeds of between £275m and £290m.
But there were long-running concerns that the FTSE 250 firm may not be able to get a reasonable price given the troubles.
Those concerns were validated on Friday. Shares in Mobico had tanked more than 40 per cent by mid-afternoon trading in a clear sign of investors’ disappointment at the £457m valuation.
“If Mobico’s latest update was one of the company’s coaches, it would be sent straight to the scrap yard,” Russ Mould, investment director at AJ Bell, said.
“The price it got for the US school bus business was less than expected,” he explained, adding that there was a “growing list of negative factors putting Mobico in the slow lane.”
Gerald Khoo, analyst at Panmure Liberum, said the valuation was “light of our assumption” of around £615m, and also included a £53m earn out that is not guaranteed to be paid in full.
“Consequently, the reduction in leverage is likely to be much less than hoped for,” he wrote in a note.
Friday’s sell-off continues a major downward trend in the share price over the last few years, with the stock dropping more than 50 per cent already since January.
A string of profit warnings, coupled with an ineffective corporate rebrand and audit issues last March that forced out the company’s finance chief, have all conspired to impact the stock.
If Mobico’s board thought the sale of its North American business would convince investors to get back on board, they were sorely mistaken.
Khoo also noted forward looking guidance for operating profit was now at the lower end of a range of between £185m and £205m.
Mobico’s issues look set to continue.