Following months of increasing pressure from investors, FirstGroup has issued a ‘strategic update’ with regard to the future of its North American business. Since his appointment four months ago following the departure of Wolfhart Hauser, Chairman David Martin has worked with management and independent advisors to review the options available, it says, and states that the Board “has been clear that its intent is to realise value for shareholders and that it will actively manage the entire portfolio by all appropriate means.”
Following this review, the Board appointed advisors to explore the options, including potential disposal, in respect of the North American business, which includes First Student and First Transit. The sale of the Greyhound business is ongoing. The Telegraph reported that investment bank Rothschild has been brought in to spearhead the potential sale.
Talking about the ‘limited synergies, particularly between the UK and the US,’ Matthew Gregory, Chief Executive said: “We have taken a number of important steps that will enable a rationalisation of the Group’s portfolio. Today’s announcement to formally explore all options to maximise value from our North American businesses reflects the resolute focus of the entire Board on realising value for all shareholders.”
In North America, First Student is a significant provider of home-to-school student transportation with a fleet of 43,000 yellow school buses, First Transit provides outsourced transit management and contracting services, while Greyhound operates a nationwide network of scheduled intercity coaches. In the UK, First’s bus division carries around 1.6 million passengers a day, whilst its rail operations, which now have now grown to include the recently-won West Coast Partnership, carried 345 million passengers last year.
According to The Telegraph, James Rasteh of Coast Capital Management (First’s second-largest shareholder) claims the company’s US operations alone are worth $5bn (£3.7bn). First’s current overall stock market value is £1.5bn. Mr. Rasteh said: “We believe that the North American assets […] are indeed better owned by entities with local presence who can invest in their growth. So today’s announcement is very welcome, we now must insist on a transparent process which releases that full value to investors.”