Belfast Telegraph

FirstGroup shares jump after board rebuffs takeover approach

Private equity firm Apollo has until 5pm on May 9 to make a firm offer for the business.


FirstGroup shares shot up nearly 10% after the transport giant confirmed it had rejected a takeover approach by American private equity firm Apollo Management.

The company – which runs the South Western Railway franchise along with MTR – said it had received a “preliminary and highly conditional indicative proposal” related to a possible all-cash offer for the business, though the financial details of the potential deal were not disclosed.

“The board of FirstGroup has considered the proposal in detail and believes that it fundamentally undervalues the company and is opportunistic in nature,” the transport firm said in a statement.

“Accordingly, the board of FirstGroup has unanimously rejected the proposal.”

Apollo has until 5pm on May 9 to make a firm offer for the business.

FirstGroup shares rose as much as 9.7% on Thursday following the news, making it one of the best performers on the FTSE 250.


Liberum transport analyst Gerald Khoo said: “We have long considered FirstGroup to be undervalued as recent poor performance has caused the market to overlook its leading or near-leading positions in all of its main markets.”

However, he cautioned that FirstGroup’s UK rail assets could complicate the deal.

“A takeover of the group would be far from straightforward, with UK Government approval required for change of control of rail franchises and pension deficits to navigate around,” Mr Khoo said.

“Nonetheless, the approach ought to act as a catalyst for more urgent action by the board to crystallise value and/or for more credit for the potential value of the group being reflected in the share price.”

The National Union of Rail, Maritime and Transport Workers (RMT) stands opposed to a potential takeover.

RMT General Secretary Mick Cash said: “This looks like yet another bunch of speculators and asset strippers homing in on the British transport sector.

“First have been propped up by the Government on the Great Western routes for many years now and are currently in dispute with this trade union over the threat to axe guards on South Western Railway.

“Where this hostile bid leaves their UK bus and rail operations in anyone’s guess.

“The only solution to this kind of uncertainty and instability is public ownership and the threat of a US-based hostile takeover of First Group just reinforces that core message.”

FirstGroup in February reported a 10.7% rise in year-to-date revenue, though when stripped of currency effects and excluding the South Western Railway franchise that increase was just 1.1%.

It said all three of its North American divisions struggled with “extremely challenging” weather conditions in January, while its Greyhound bus long-haul business in North America was hit by intensifying competition with low-cost airlines.

Like-for-like revenues for Greyhound bus operations slumped 0.4% for the year to date and fell 2.8% between September and January.

However, it recorded a 3.2% rise in like-for-like passenger revenue across its First Rail division, “notwithstanding ongoing infrastructure challenges”.

Its First Bus business is said to have had a strong start to the academic year for its student-focused services, though year-to-date figures showed like-for-like passenger revenue rose just 0.9%.

Press Association