Scottish transport firm FirstGroup has formally rejected a proposed takeover bid worth £1.2bn from an American private equity firm; I Squared, claiming that the proposal “significantly undervalued FirstGroup’s continuing operations and its future prospects”.
The bid itself has valued FirstGroup to be worth up to 163.6p a share, including 45.6p that is conditional on the amount the company eventually receives from the previously agreed sale of its American businesses, including the Greyhound bus line. The certain conditions relating to the additional share pricing has been critiqued as it “does not provide shareholders with sufficient certainty.”
The deal involved a cash element which would have been worth £885 million to the shareholders, with an additional second portion that could have handed out an additional £340 million.
In total, the offer for FirstGroup was worth a total of up to 163.6p a share, which would have given the Scottish transport giant a valuation of £1.23 billion. This represents a premium of 37% compared with FirstGroup’s closing price of 119.40p on May 25, before the offer was revealed.
I Squared have a limited time frame under City Takeover Panel rules to produce a firm counteroffer, with the deadline being 5pm on 23rd June or walk away from the deal.
FirstGroup have come under fire in recent years from activist investors, with chief executive Matthew Gregory leaving last autumn after less than three years in the post and in the wake of demands for his resignation from the group’s biggest shareholder.
Coast Capital, a New York based hedge fund had called on Gregory and two non-executive directors, to step down last year, due to the £3.3 billion sale of First Student and First Transit in the US being too cheap and poorly timed at the peak of pandemic disruption.
FirstGroup has since tried to appease shareholders by announcing it will return £500 million to them from the sale of the US school bus and transit divisions while also selling its US long-distance coaches arm Greyhound Lines to Germany’s FlixMobility.
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