FirstGroup shares soar as transport company rejects takeover offer
FIRSTGROUP SHARES shot up nearly 10 per cent after the transport giant confirmed it had rejected a takeover approach by American private equity firm Apollo Management.
The company – which runs the South Western Railway franchise along with MTR – said 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.
“The board of FirstGroup has considered the proposal in detail and believes it fundamentally undervalues the company and is opportunistic in nature,” the transport firm said in a statement.
“Accordingly, the board of FirstGroup has unanimously rejected the proposal.”
Apollo has until 5pm on May 9 to make a firm offer for the business. FirstGroup shares rose as much as 9.7 per cent following the news, making it one of the best performers on the FTSE 250.
Liberum transport 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 nearleading 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 Government approval required for change of control of rail franchises and pension deficits to navigate around,” Mr Khoo said.
“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.”
FirstGroup in February reported a 10.7 per cent rise in yearto-date revenue, though when stripped of currency effects and excluding the South Western Railway franchise that increase was just 1.1 per cent.