FirstGroup under pressure from its largest shareholder
FirstGroup (LON:FGP) are up by nearly 10% on Friday after the company confirmed its plans to sell US school bus business to investor EQT in a £3.3bn.
The FTSE 250 company has been coming into pressure from activist investors to sell its American business.
FirstGroup has been engaged in an ongoing battle with its largest shareholder, US investment company Coast Capital Management for some time now. The dispute previously led to the departure of former chairman Wolfhart Hauser in 2019.
FirstGroup chairman David Martin, formerly chief of rival transport group Arriva was drafted in to oversee the business’ break-up.
AJ Bell investment director Russ Mould commented on its decision to sell the US arm of its business:
“It’s another win for the activist investor community as FirstGroup strikes a deal to sell two US operations. Its biggest shareholder Coast Capital had been putting pressure on FirstGroup to do something about this part of the business, initially suggesting a demerger but the sale should go down well given the good price achieved,” said Mould.
“There are still some bits to tidy up with the remaining operations, such as the likely sale of its Greyhound business. That should then leave it focused on the UK bus and rail market.”
“The rise in working from home has put a question mark over the level of commuter demand going forward. It could be another year before there is more clarity on the new operating models for companies and how much flexibility is given to staff regarding their working location. However, FirstGroup is no doubt taking a long-term view that demand for public transport will remain robust.”
““On the rail side, the UK Government is moving to a more predictable contract model whereby operators such as FirstGroup will be paid a fixed management fee with performance incentives for delivery against specific punctuality and other operational targets.”
