Company signals break-up
FirstGroup puts bus and rail businesses under review
Unwanted: FirstGroup bus business
Transport company FirstGroup has announced that it will break itself up, sell its UK buses and review its rail operations as it focuses on its businesses in North America.
The Aberdeen-based company will sell the iconic Greyhound bus business in the US and is pursuing “structural alternatives” to separate its First Bus operations from the Group.
It is also reviewing its interests in the rail industry because of reduced expectations for its two most recently awarded franchises and “concerns with the current balance of risk and reward being offered”.
The company said in a statement today that its future emphasis will be on First Student and First Transit, its core North American contracting businesses, “which have the greatest potential to generate sustainable value and growth over time”.
The announcement follows pressure from activist US hedge fund Coast Capital, which owns a 9.7% stake in the firm and is its largest shareholder.
Coast has demanded that FirstGroup split its UK and US assets and withdraw from Britain’s “destructive” rail industry in a bid to return to profit.
It is also seeking to remove six of the 11 current directors and replace them with seven of its nominees. Those it is targeting include chief executive Matthew Gregory and chairman Wolfhart Hauser.
In the UK, the company runs three rail franchises – Great Western Railway, South Western Railway (SWR) and TransPennine Express – and is bidding for the West Coast Partnership franchise, which is due to be awarded in the summer. It lost the ScotRail franchise to Dutch state-owned firm Abellio.
First has endured a difficult year after Tim O’Toole stood down as CEO last May following a £327m annual loss.
FirstGroup today announced that pre-tax losses for the year to March narrowed to £97.9m on sales 11.4% higher at £7.1 billion.
TSSA General Secretary, Manuel Cortes, has demanded all bus and train franchises held by FirstGroup return to public control..
He said: “What we have heard from FirstGroup shows there is not a scintilla of doubt that they are no longer interested in bus and rail services in the UK.
“This is hugely concerning for the future of our transport network and the millions of people who rely on it daily. There would also be a significant dent in the economy if these services are all but abandoned, as FirstGroup seem to be planning.
“For the good of all it’s crucial that the Government acts now to take these rail franchises and bus routes back in house. That is the right thing to do in order to protect jobs, services and our network.”