FirstGroup rebuffs £1.2bn takeover approach

The bus and rail group said the proposal from I Squared Capital Advisors ‘significantly undervalues’ the firm.

09 June 2022

Transport firm FirstGroup has rejected a £1.2 billion takeover proposal from an American serial suitor for being too low.

The Aberdeen-based group said the board believed the 118p-a-share upfront cash part of the unsolicited takeover approach from Miami-based I Squared Capital Advisors “significantly undervalued FirstGroup’s continuing operations and its future prospects”.

It added that the additional 45.6p-a-share part of the offer, which was based on some conditions, “does not provide shareholders with sufficient certainty”.

FirstGroup revealed late last month that it had received a new offer from I Squared, after a series of “unsolicited” and “conditional” proposals which had all previously been rejected.

The cash part of the deal was worth about £885 million to shareholders, and the second could have handed them an additional £340 million.

I Squared had told the FirstGroup board that the extra 45.6p part of the deal was based on how much the company made from the sales of its US First Transit and Greyhound businesses.

The offer was worth up to 163.6p a share in total, giving FirstGroup a valuation of £1.23 billion – a premium of 37% compared with FirstGroup’s closing price of 119.40p on May 25, before the offer was revealed.

But FirstGroup said its board had “unanimously rejected” the approach.

I Squared must make a firm offer by 5pm on June 23 or walk away under City Takeover Panel rules.

It comes ahead of FirstGroup’s annual results on Tuesday.

FirstGroup has been in the activist investor firing line in recent years, with chief executive Matthew Gregory leaving last autumn after less than three years in the post and in the wake of demands for his resignation from the group’s biggest shareholder.

New York-based hedge fund Coast Capital made a call in July last year for Mr Gregory, and two non-executive directors, to step down after it said the £3.3 billion sale of First Student and First Transit in the US was too cheap and poorly timed at the peak of pandemic disruption.

FirstGroup has since tried to appease shareholders by announcing it will return £500 million to them from the sale of the US school bus and transit divisions while also selling its US long-distance coaches arm Greyhound Lines to Germany’s FlixMobility.

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