FirstGroup sells US school bus arm for £3.3bn and pledges to repay government Covid loan with proceeds

Jim Armitage
·2 min read
s (FirstGroup )
s (FirstGroup )

FirstGroup today sold its US yellow school buses business for a bumper £3.3 billion enabling it to repay its £300 million government Covid loan and hand £365 million to shareholders.

Shares in the company surged 13% as investors cheered the long-awaited deal.

It was achieved despite the year of pandemic which has hit revenues as school campuses have been closed or operating on reduced numbers of students.

FirstGroup is selling the First Student and First Transit divisions to EQT Infrastructure, the infrastructure investment arm of the Swedish EQT private equity group.

The operations have been seen by investors as a perennial underperformer since FirstGroup bought it in 2007’s £1.9 billion takeover of the US Laidlaw group.

That deal, timed at the top of the market just before the financial crisis hit, also included the Greyhound bus network which is also thought to be up for sale.

FirstGroup said it would inject £1.34 billion of the proceeds into paying down the group’s debt, including £300 million to repay its Covid Corporate Financing Facility loan.

Such repayments of Covid loans were attributed with today’s public finance figures being less bad than originally expected.

A further £336 million goes into the pension fund of the Group and UK Bus divisions.

Shareholders can expect an initial 30p-per-share return of cash with the promise of more to come.

FirstGroup had come under pressure to sell the US arm from activist investor Coast Capital in 2019.

Analysts at Liberum said: “We see the disposal as a clear positive, allowing the group to be simplified, with reduced leverage and legacy liabilities addressed.”

FirstGroup chief executive Matthew Gregory said FirstGroup would now be “a more focused, resilient business that is in a strong position to deliver for bus and rail passengers in the UK.”

Coast remains the group’s biggest shareholder, with 13%, while Schroders is in the number two spot at 12%.

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