The group has sealed a deal to offloaded the First Student and First Transit businesses to EQT Infrastructure more than a year after first announcing plans to quit North America amid pressure from activist investors.
First Student operates some 43,000 highly-distinctive school buses in the US, while First Transit runs local bus and transport services.
The cash raised from the deal will be used to pay down debts, including £300 million borrowed from the UK government as part of coronavirus support loans.
Around £336m will be added to the UK Bus and Group pension schemes and £365m will be handed over to shareholders in a dividend later this year.
Plans to sell FirstGroup’s Greyhound coach business in the US continue and bosses hope to hand out more cash as suitors are tapped up.
Chairman David Martin told investors: “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.
“On behalf of the board, I would like to thank all of our employees for their hard work and commitment in dealing with the immense challenges of the past year.”
Chief executive Matthew Gregory 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.
“Our colleagues at First Student and First Transit have built excellent relationships with their customers over many years, and we are proud of their commitment and expertise.”
He added: “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 [environmental, social and corporate governance] goals.”
The sale of the two divisions comes a year after activist investor Coast Capital – the company’s largest shareholder – attempted to stage a boardroom coup.
According to filings, Coast has a 13.8 per cent stake in the Scottish transport giant and wanted the business to sell off its North American division after failing in its attempts to replace several board members.
FirstGroup, which operates Great Western Railway, South Western Railway, TransPennine Express and Avanti West Coast, said in December 2019 that a formal sale of its US businesses was under way. The sale will now be formally put to a vote by shareholders.
Meanwhile, the group announced that Jane Lodge and Peter Lynas would join the board as non-executive directors on June 30.
David Robbie has notified the group that he will not seek re-election at the 2021 AGM and will stand down at the end of June.