FirstGroup shareholder West Face Capital has written a four-page letter to Chairman, Wolfhart Hauser, urging him to consider a full sale of the transport business, a break-up or a separation of its North American operations.
As reported in The Daily Telegraph, the letter criticises FirstGroup’s board for ‘failing to address chronic underperformance’; according to West Face, the board’s lack of action led to private equity firm Apollo’s ‘opportunistic’ takeover bids.
West Face – which holds a 2.5% stake in FirstGroup – advises the operator to form a board subcommittee to complete a full strategic review, with a view to boosting shareholder value.
The Toronto-based alternative asset management firm says FirstGroup has to “acknowledge that the execution of its strategy has failed and that an alternative path must be taken.
“A comprehensive strategic review must be undertaken immediately to address chronic underperformance and unacceptably low valuation,” West Face said.
Tim O’Toole, the current Chief Executive, took over in 2010 – and the operator has since seen shares drop almost 70% in the last eight years.
West Face argues that he has ‘refused to act’ in recent years, despite the firm repeatedly outlining proposals to improve performance; West Face says the board has rejected its suggestions four times in the last 12 months.
Tim last year refused to acknowledge the need for a strategic review, arguing that his strategy was delivering “improved growth and more consistent returns” – with West Face simply arguing that he has “failed” during his leadership.
A FirstGroup spokesperson told CBW: “The board is open to all means of enhancing long-term value and welcomes the views of the group’s shareholders.
“The board believes there is considerable value in the scale and expertise of each of our businesses, and remains entirely focused on delivering that value for shareholders.
“The company will publish its full year results on May 31 and will update the market on the group’s performance and future prospects at that time.”
