Firstgroup shares travel further ahead

Market report Scott Reid

Shares in Firstgroup continued to travel forward in the wake of the Scottish transport giant’s rejection of a takeover approach by US private equity outfit Apollo Management.

The Aberdeen-based bus and rail operator said on Wednesday evening that 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.

Apollo has until 5pm on 9 May to make a firm offer for the FTSE 250 group, whose shares yesterday rose 8.2 per cent to close at 110.1p.

Liberum 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,” Khoo noted.

“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.”

Mick Cash, general secretary of the National Union of Rail, Maritime and Transport Workers (RMT), said: “This looks like yet another bunch of speculators and asset strippers homing in on the British transport sector.”

The FTSE 100 inched up 1.2 points to 7,258.34. The chain sidestepped the gloom shrouding the retail sector yesterday as it said its sales in the third quarter rose by 5.1 per cent to £268.2 million. Around 300 jobs aretobeaxedat Carpetright after the embattled retailer unveiled plans to shut another 81 stores and tap investors for £60 million.