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First Group rejects £1.2bn takeover bid from private equity I Squared

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The Liberal Democrats have written to the government to complain over rail operator First Group's handling of customer complaints.
First Group runs lines such as Great Western Railway.

Public transport titan First Group has rejected a £1.2bn takeover bid from US private equity I Squared.

FirstGroup is the latest UK company to be sought after by foreign investors, as rival Stagecoach was snatched from underneath National Express by German asset manager DWS in late May.

In an update to the London Stock Exchange, the bus and rail operator said its board had unanimously rejected the bid, which was initially made on 26 May.

The Miami-based investment firm had proposed a cash component of 118 pence per FirstGroup share.

The offer also included a contingent right to up to a further 45.6 pence per FirstGroup share based on the outcome of the First Transit earnout and the net proceeds from the sale of the Greyhound bus division.

However, with a shareholder row brewing over the offer, First Group said on Thursday that the cash component of the proposal “significantly undervalues” the group’s operations and future prospects.

The group’s majority shareholder, asset manager Schroders called the offer “unattractive.”

FirstGroup added that the contingent right “does not provide shareholders with sufficient certainty”.

The deal’s total worth would have amounted to £1.2bn, with £885m up-front and an additional £340m derived from First Transit and Greyhound’s sales.

FirstGroup – who owns Avanti West Coast, South Western Railway as well as bus companies in the UK and abroad – earned £125m from selling Greyhound in October last year, while it could make up to £170m from First Transit’s 2021 sale. 

Under takeover rules, I Squared must now announce a firm intention to make an offer for FirstGroup or declare it does not wish to make one by a deadline of 5pm on 23 June.

However, the deadline can be extended if given a green light by the panel on takeovers and mergers.

The company reiterated there could be “no certainty either that an offer will be made nor as to the terms of any offer, if made.”