First Group sells US yellow bus business for £3.3bn
First Student operates in the US
Transport company First Group has sold its yellow school buses in the US in a deal worth £3.3 billion.
Aberdeen-based FirstGroup, which also runs bus and train services in Britain, announced that EQT Infrastructure is buying First Student and First Transit operations.
EQT Infrastructure is affiliated to the Sweden-based private equity firm EQT.
Part of the proceeds of the sale will be used to pay down debt, with a chunk of the capital received also likely to be handed to FirstGroup’s pension schemes.
The announcement comes more than a year after FirstGroup formally kicked off the auction, which faced significant disruption as a result of the coronavirus pandemic.
First Student operates roughly 43,000 yellow school buses across the US, while First Transit carries hundreds of millions of Americans across its public transport network each year.
The London-listed company has been under pressure to offload its US businesses from activist investors, and is understood to be planning to kick off the sale of its Greyhound arm once the deal with EQT Infrastructure is concluded.
Matthew Gregory, FirstGroup chief executive, said: “We are pleased to have agreed the sale of First Student and First Transit in a transaction which recognises their full strategic value.
“Both are resilient, high quality businesses with strong prospects for returning to normal levels of service following the pandemic.
“As economies begin to emerge from the pandemic restrictions and society begins the process of building back better, the vital role of public transport is clear.
“The services we provide are critical to economic activity and social objectives including ‘levelling up’, and play an important role in combating climate change and helping local communities flourish.
“Going forward, FirstGroup will be a more focused, resilient business that is in a strong position to deliver for bus and rail passengers in the UK, continue investing in its zero-emissions fleet strategy and play a key role in meeting society’s broader ESG goals.”
David Martin, FirstGroup chairman said: “This transaction, which follows a strategic review by the board of all options to unlock value, enables FirstGroup to address its long-standing liabilities, make a substantial contribution to its UK Bus and Group pension schemes and return value to shareholders, while ensuring the ongoing business has the appropriate financial strength and flexibility to deliver on its goals.”
FirstGroup shares traded 18% higher in early trade and closed up 4.47% at 89.3p.
AJ Bell investment director Russ Mould described the sale as “another win for the activist investor community.”
He added: “FirstGroup will certainly be in a better financial shape thanks to the US disposals.
“That will be quite a relief for the company after a long period of management first being distracted by shareholder pressure and then having to deal with the brutal impact of Covid-19 on transport demand.”