First Group rejects £1.2bn bid from US private equity

TRAIN operator First Group has rejected a £1.2bn takeover bid from US private equity firm I Squared Capital.

The transport giant said it has rebuffed the offer from Miami-based I Squared because it “significantly undervalues” the business and its growth prospects.

I Squared offered 118p in cash for First Group and a further 45.6p payout, which is conditional on how much the Aberdeen-based company earns from its previous sales of US businesses.

First Group sold its Greyhound bus line in October 2021 to Flixmobility, the German company behind Flixbus, for $172m (£125m).

In April 2021, it also offloaded two US transport divisions, First Student and First Transit, to private equity investors EQT for £3.3bn.

The train operator has not yet fully realised the value of those deals, however. The amount it eventually earns will depend on the performance of those companies under new ownership.

First Group, which operates the Great Western Railway and the South Western Railway, warned I Squared’s bid did not give shareholders “sufficient certainty”.

The company’s biggest investor last week described I Squared’s offer for the company as “unattractive”. Schroders Asset Management, which owns almost 18pc of First Group, said the offer did not properly value the transport company’s assets.

Andy Simpson, Schroders’ UK equity fund manager, said: “The proposal is highly conditional and leaves shareholders exposed to downside risks at a time when we believe the stand-alone company has attractive growth prospects, a strong balance

‘The proposal is highly conditional and leaves shareholders exposed to downside risks’

sheet and a depressed valuation.

“We firmly believe that any offer needs to fairly reflect the attractive characteristics and scarcity value of the underlying assets.”

I Squared now has until June 23 to increase its offer for First Group.

The private equity firm’s bid comes after First Group’s rival Stagecoach was last month snapped up by DWS.

The German asset manager beat National Express in the race for Stagecoach with a £595m takeover of the company.