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FirstGroup investors ‘unhappy’ with offer structure

TransPennine Express
FirstGroup, which operates franchises such as TransPennine Express, has rejected the offer

Shareholders are believed to be unimpressed with the structure of a proposed £1.2 billion offer for Aberdeen-based transport company FirstGroup.

Shares in the company slid 7.7p to 129p in early trade but recovered to be virtually unchanged after the board rejected the approach from US private equity firm I Squared Capital Advisors.

The board said the cash component of 118p per share “significantly undervalues” FirstGroup’s continuing operations and its future prospects, while the additional 45.6p per share “does not provide shareholders with sufficient certainty”.

Russ Mould of AJ Bell said the split offer is “not attractive to shareholders as there is uncertainty over how much they would get, given one component is dependent on the outcome of various factors.

“Furthermore, FirstGroup doesn’t think the main cash component is generous enough.

“Increasingly we’re seeing takeovers given the thumbs down unless the offer is all in cash and it’s pitched at a decent premium to the market price, to reflect the future potential of the business as well as the current state.

“So, the idea of saying to FirstGroup shareholders that there are lots of ‘ifs and buts’ attached to the offer won’t wash in the current environment.”

I Squared Capital has until 5pm on 23 June to either make a firm offer or walk away.

FirstGroup will announce its results for the year on 14 June. Its 17,500 staff run four rail franchises: Great Western Railway, South Western Railway, TransPennine Express and Avanti West Coast. It also runs Hull Trains and Lumo between London and Edinburgh.

A successful bid would see Scotland lose both its stock market listed transport companies this year. Perth-based Stagecoach has been acquired in a £595m takeover by pan-European infrastructure fund managed by Germany’s DWS Infrastructure. 

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