FirstGroup offers to buy up to £500m in shares from investors

Transport business FirstGroup has confirmed its intentions to return up to £500million to shareholders.

From tomorrow, the company is offering investors the chance to sell their shares for 105p, a 9.2 per cent premium on their closing price yesterday, until lunchtime on November 29.

The offer forms part of a promise that it made when it sold two North American businesses, First Student and First Transit, earlier in the year to Swedish private equity firm EQT Infrastructure for £3.3billion.

Activist investor and the group’s largest shareholder, Coast Capital, has now committed to selling down its holding of more than 156million shares, which would comprise about one-third of the tender offer.

Should the full £500million not be returned, FirstGroup has said it would oversee a £50million share buyback scheme and distribute any remaining amount above this figure in the form of a special dividend.

Coast Capital has pressured the firm for some years to offload its North American businesses due to a long-term period of stock market weakness that worsened after the coronavirus pandemic caused travel levels to plummet.

But it heavily criticised FirstGroup’s sale of its yellow bus and intercity bus divisions because it claimed they were sold on the cheap and were poorly timed.

It described the sale as a ‘disastrous proposal’ and offered alternative proposals to the board that it claims were ignored while founding partner James Rasteh claimed it left ‘billions of dollars on the table.’

The private equity firm sought to expel chief executive Matthew Gregory and two board directors from the company. 

Gregory has subsequently left, though he denied investor pressures was behind his departure.

Big sale: Last week, FirstGroup agreed to sell its Greyhound bus arm to German company FlixMobility for £125m after two years of trying to find a buyer 

FirstGroup was motivated to sell off the two businesses as part of a reorientation towards its UK-based operations, where it runs numerous bus and train services, including Avanti West Coast and the Great Western Railway.

David Martin, the executive chairman of FirstGroup, said today’s announcement by the firm ‘marks the culmination of our portfolio rationalisation strategy, as announced in December 2019, which has refocused the Group on its leading UK public transport businesses.’

Martin added: ‘In doing so, we have created a cash generative company with a well-capitalised balance sheet, a focused strategy and attractive growth prospects in our markets.

‘The policy backdrop in the UK has never been more supportive, and public transport has a critical role to play in helping communities and economies build back better and more sustainably.’

UK focus: FirstGroup has sold its North American divisions as part of a move towards focusing on its UK-based operations, where it runs train services such as the Great Western Railway

FirstGroup’s strategy took another major step last week when it agreed to sell its Greyhound bus arm to German company FlixMobility for £125million after two years of trying to find a buyer.

FirstGroup will hold onto some of Greyhound’s financial liabilities as well as several Greyhound properties, which it plans to lease back to Greyhound before selling them at some point over the coming three to five years.

Aside from the share offer, FirstGroup also vowed to use proceeds from the deal towards slashing its debts, including £300million it borrowed from the UK Government in emergency coronavirus loans and another £336million towards its UK pension schemes.

Shares in FirstGroup ended trading 4.5 per cent higher at 100.5p on Wednesday. Since the start of 2021, their value has grown by almost half.