ABERDEEN-based FirstGroup could be poised to lose its independence after revealing it was considering a takeover approach that values the company at up to £1.23 billion.
The approach comes just days after fellow Scottish transport giant Stagecoach was effectively sold to DWS, the German infrastructure investor, in a deal worth £595 million.
And it emerged just 10 days after telecoms veteran Graham Sutherland took over as chief executive of FirstGroup.
The company, which owns First Bus and the West Coast rail franchise, told the City that its board was considering the latest in a series of “unsolicited, conditional proposals” from private equity outfit I Squared Capital Advisors to acquire its entire issued share capital. Shares in the company surged by seven per cent as investors digested the news.
FirstGroup said the latest approach from I Squared Capital, which was received on Wednesday evening, provides for a cash component 118p per share and a contingent right to up to a further 45.6p per share. The contingent right is based on the outcome of the earn-out that can be achieved by FirstGroup from the sale of First Transit, and the net proceeds realised from Greyhound legacy assets and liabilities. Previous approaches from I Squared were all unanimously rejected by the FirstGroup board.
FirstGroup has found itself a takeover target after completing its withdrawal from the US last year. It first the US market around 15 years ago with the acquisition of Laidlaw, the transport conglomerate. That deal saw it take over the Greyhound, First Transit and First Student businesses.
After a sale process was launched for First Transit and First Student in March 2020, FirstGroup announced in April last year that it struck a deal to sell the two businesses to EQT Infrastructure, a private equity group, for $4.6bn (£3.3bn).
It then struck a deal to sell Greyhound to FlixMobility, a European bus and rail company, for $172m (£125m) in October – two years after the for-sale sign was first hoisted above the operation.
The sales of the US businesses left FirstGroup free to concentrate on its UK bus and rail operations, which in common with other transport providers have seen patronage affected by the pandemic over the last two years.
First Bus is the second-largest regional bus operator in the UK, with a fleet of around 5,000 vehicles. First Rail is the country’s largest train operator, and runs the Avanti West Coast, Great Western Railway, South Western Railway and TransPennine Express contracts.
Last month, the company announced that it had appointed Mr Sutherland, a former senior executive of BT, as its new boss.
Mr Sutherland, who joined on May 16, replaced Matthew Gregory, who stepped down in September.
David Martin has been serving as executive chairman since Mr Gregory’s departure, and will resume his role as chairman on July 1.
Should a deal go through, FirstGroup would become the latest in a series of major Scottish listed companies to lose their independence, following a path trodden previously by businesses such as Stakis, Scottish & Newcastle, Kwik-Fit, and ScottishPower.
FirstGroup disclosed the I Squared Capital approach less than a week after Perth-based Stagecoach was effectively sold.
DWS, a German infrastructure investor that is owned ultimately by Deutsche Bank, saw its cash bid of 105p per share bid for Stagecoach declared unconditional last week.
I Squared Capital, a global infrastructure investment manager focused on energy, utilities, telecoms and transport, joined forces with TDR Equity to acquire Aggreko, the Glasgow-based temporary power specialist, for £2.3bn last year.
Shares in FirstGroup closed up 8.2p, or 6.9%, at 127.6p.