Scots bus giant FirstGroup ponders takeover approach from US investor

FirstGroup, the Scottish transport heavyweight, has said that it is studying a new takeover proposal from a serial suitor based in the US.

The Aberdeen-headquartered bus giant said that it was the latest of a series of “unsolicited” and “conditional” proposals from Miami-headquartered I Squared Capital Advisors. So far they have all been rejected.

The latest takeover attempt offers 118p per share in cash up front for the business and a further 45.6p per share based on some conditions.

The up-front part of the deal is worth about £885 million to shareholders, the second could hand them an additional £340m.

Shares in FirstGroup jumped following disclosure of the renewed interest.

The group said in a statement to the stock market: “The board of FirstGroup notes the recent share price movement. The company has received a series of unsolicited, conditional proposals from I Squared Capital Advisors (UK) LLP in relation to a possible offer to acquire the entire issued, and to be issued, share capital of the company.

“The board together with its advisers, is currently evaluating the latest approach, which provides for a cash component of 118p per share and a contingent right to up to a further 45.6p per share based on the outcome of the First Transit earnout and the net proceeds realised from the Greyhound legacy assets and liabilities.

“The previous approaches were all unanimously rejected by the board. FirstGroup shareholders are strongly advised to take no action in relation to the approach from I Squared.”

Aberdeen-headquartered FirstGroup operates one of the biggest bus fleets in the UK. Picture: John Devlin

The firm’s suitor had told the board that the extra 45.6p part of the deal is based on how much the company makes from the sales of two businesses.

When the company sold US transport company First Transit in 2021 the contract included an earnout clause which means it can collect up to £170m if the business performs well enough under the new ownership.

Depending on how much of this money comes through and the proceeds from a separate sale, the price I Square will pay could rise by as much as £340m.

In a trading update in February, FirstGroup said bus volumes had improved to more than 70 per cent of pre-pandemic levels overall since the easing of Omicron-related government restrictions.

First Rail management fee-based operations were said to be delivering “performance metrics in line with our expectations”, with the firm’s open access operations slightly ahead.

The group is behind the new Lumo east coast open access rail service connecting Edinburgh and London.

Executive chairman David Martin said in February: “We now have a focused and simplified group and continue to enhance our financial strength and resilience by proactively managing the legacy assets and liabilities associated with last year’s portfolio rationalisation.

“We are pleased that passengers are returning to travel again following the easing of the Omicron-related restrictions put in place in December. It demonstrates our conviction that there is significant latent demand for travel on our services and we look forward to providing vital connections for our customers as the recovery continues to build.

“Public transport has a key role to play in the UK’s economic, decarbonisation and levelling up agendas.”