Mobico Group shares sank on Friday after announcing an agreement to sell its North America School Bus business to I Squared Capital for an enterprise value of up to $608 million.
The deal represents approximately 50 times School Bus’ expected FY24 Adjusted Operating Profit of $11.5 million and about 5.0 times its expected FY24 Adjusted EBITDA of $122 million.
Mobico anticipates receiving upfront net proceeds of approximately $365-385 million (£275-290 million) following the sale.
However, the market was far from impressed with the deal, and Mobico shares fell 24% on Friday morning.
The North American unit accounts for approximately one-third of Mobico’s revenue, but the group struggles to achieve meaningful margins from the unit.
The sale is part of Mobico’s commitment to strengthen its balance sheet and accelerate debt reduction. Mobico plans to retain all net proceeds to reduce its net debt position, whilst continuing to evaluate options for further debt and leverage reduction.
The disposal allows Mobico to reallocate resources away from the capital-intensive School Bus business, which has required over £200 million in investment over the past three years without generating meaningful positive free cash flow to support debt reduction plans.
“This agreement is a significant milestone for Mobico. It is a first step in strengthening the Group’s balance sheet and will allow us to reallocate resources away from a capital-intensive business as we focus on continued deleveraging alongside funding our pipeline of growth opportunities, especially in ALSA,” Ignacio Garat, Group Chief Executive of Mobico, said.
I Squared Capital, described as having “an excellent track record in the sector,” is positioned to support the existing management team as they continue to grow School Bus as an independent business.
Notably, WeDriveU, the Group’s North America transit and shuttle business, is not part of the transaction and has been successfully carved out to operate as a standalone business.