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FirstGroup to sell Greyhound bus unit
FIRSTGROUP Plc shares jumped the most in a decade after chief executive officer Matthew Gregory bowed to shareholder pressure and said he would break up the UK bus and train operator. Mr Gregory, who has headed the Aberdeen, Scotland-based company since November, reversed a vow to keep it together. Selling the US Greyhound bus service and its UK counterpart First Bus, and pulling back from its commitment to rail will enhance value for shareholders, he said in a statement on Thursday.
FirstGroup, which owns a disparate group of bus and rail assets, has been under withering criticism from its biggest shareholder, Coast Capital LLC. The company will now focus on two North American businesses - First Transit, which manages public bus systems, and First Student, which operates yellow school buses - where there is "significant potential to generate long term, sustainable value and growth", Mr Gregory said.
"We have five businesses with limited hard synergies," Mr Gregory said on a conference call. "The time is right to focus on the US." First Bus will be separated, the company said, after a series of investments and cost efficiencies have improved profit margins. Its rail network, which includes South Western Railway and Great Western Railway, will be operated "in accordance with their terms". The company is awaiting the outcome of a UK review of rail-industry structure before deciding whether to make any future commitments to the sector.
First Group shares hit 124.80 at one stage yesterday and settled at 116 pence at 6.30 pm Singapore time. The stock has advanced 48 per cent this year, as pressure mounted from Coast Capital, after declining 29 per cent in 2018.
Coast Capital founder James Rasteh told Bloomberg radio this month that the rail operations have become a "black hole". He's also called on Mr Gregory and much of FirstGroup's board to quit, saying they lack sufficient experience in surface transport.
Previous CEO Tim O'Toole left last May after delivering an annual loss and overseeing an almost 75 per cent decline in the stock price.
"What we said in November is that we were looking at ways to unlock value," Mr Gregory said. "While we engage with all shareholders, this hasn't been driven by Coast Capital's view - it's the result of a lot of work internally."
FirstGroup last year rejected takeover bids from Apollo Global Management LLC, saying they undervalued the business. The company has also attracted interest from buyout firms including CVC Capital Partners, sources said last year.
The decision comes as First Group reported an annual adjusted pretax profit of £226.3 million (S$394 million). The company said it won't pay a dividend for the year that ended in March. BLOOMBERG