FirstGroup is the latest British business to fall prey to private equity plunderers after confirming a £1.2billion ‘unsolicited’ bid.
The Aberdeen-based bus and train operator, which employs 30,000 people in the UK, has been swooped on by US buyout business I Squared Capital.
The 163.6p per share offer is being considered by FirstGroup’s board after it had previously rebuffed a ‘series of unsolicited, conditional proposals’ from the US private equity firm.
Target: Aberdeen-based bus and train operator FirstGroup, which employs 30,000 people in the UK, has been swooped on by US buyout business I Squared Capital
A year ago FirstGroup cleared most of its debts with the sale of its city buses and school yellow bus operations in the US for £3.3billion, most of which went to clearing the group’s liabilities, including to pensioners.
Later that year it sold its US intercity coach business Greyhound for £125million.
Shares jumped after the announcement and closed up 8.7 per cent, or 10.4p, to 129.8p.
Private equity firms use their wealthy investors’ money to buy companies and sell them on five to ten years later for a profit.
Though some of these buyout houses can help companies grow and improve, many have slashed jobs, broken up businesses in ways which can leave them weaker down the line, and loaded firms with debt.
Last year saw record private equity activity in the UK, and buyout firms were accused of ‘pandemic plundering’ as they scooped up companies on the cheap amid the stresses of Covid.
Firms taken private during the pandemic included Asda, Morrisons and G4S. And I Squared’s bid for FirstGroup comes just over a week after notorious buyout giants KKR agreed a £1.75billionn deal to take over London-listed energy producer ContourGlobal.
While on Monday, Morrisons owner Clayton Dubilier & Rice (CD&R) told an audience at the World Economic Forum in Davos, Switzerland that private equity firms would sustain their vociferous hunting in the UK.
Florida-based I Squared last year snapped up portable power firm Aggreko alongside Asda’s co-owners TDR Capital. Its swoop on FirstGroup, which runs almost 9,000 buses and trains across the UK, is dependent on the final outcomes of the sale of its US businesses Greyhound and First Transit.
It offered a flat 118p per share with an additional 45.6p based on the deals, potentially valuing FirstGroup at £1.22billion.
In the year before Covid struck, FirstGroup had sales of £7.5billion, with £109.9million of profit.
Analysts at broker Jefferies said that FirstGroup was the latest transport company to face takeover interest and ‘reflected international confidence in the UK public transport landscape’.
Last week the £595million takeover of transport group Stagecoach by German infrastructure group DWS was completed.
