The FTSE 250 company, which operates multiple transport services including several UK rail franchises and Greyhound and school bus services in the US, is under pressure by Coast Capital as the hedge fund announced plans to call an emergency general meeting (EGM) for investors to vote on whether to sell the company’s First Transit and First Student businesses.
Coast, which owns around 10% of FirstGroup, has said it will pour around £200mln into the company if its proposals are approved in exchange for shares in the demerged North American business.
The company itself floated the possibility of selling its North American businesses in December, however, there have been no announcements made since then.
In a statement on Monday, FirstGroup noted Coast’s announcement and said it “agrees that there is material value to be unlocked within the Group and is intent on delivering this in the best interests of all shareholders”.
“Our scheduled trading statement will be published on Wednesday 11 March, in which we will update the market on trading since our half-year results in November in addition to the progress of our strategic plans, including in relation to our North American contract businesses”, the firm added.
In a note, analysts at Peel Hunt, which rate FirstGroup at ‘buy’ with a 164p price target, said the timing of Coast’s intervention was “unfortunate” given that the coronavirus outbreak was likely to result in “reduced demand for public transport in North America and the UK”.
“We believe that there is considerable demand for First Student from private equity and infrastructure investors and would like to see a disposal process run its course, although we acknowledge that this process may be slowed by [coronavirus]”, the broker said.
This is not the first time that the activist investor had butted heads with FirstGroup, with the company having seen off an attempt by the fund to oust six members of its board at an EGM in June last year amid a dispute over its strategy.
Targets of the attempted coup included the then chairman Wolfhart Hauser as well as chief executive Matthew Gregory and four other directors. Despite winning majority backing from investors, Hauser did not stand for re-election at the subsequent AGM in July and was replaced by former Arriva chair David Martin.
FirstGroup shares were down 5.7% at 94.5p in mid-afternoon trading.
–Adds FirstGroup statement and updates share price–