(Reuters) -FirstGroup agreed to sell its U.S. school bus business for $4.6 billion including debt to Swedish private equity firm EQT Infrastructure on Friday, to focus on its bus and rail operations in the UK.
Shares in the FTSE 250 firm, which operates First Bus and four train contracts in Britain, surged 19% in early trade to hit a more than one year high of 101.3 pence.
The company plans to use proceeds to pay down debt, including UK government coronavirus aid, contribute to its UK pension schemes and return money to shareholders.
It plans to return about 365 million pounds ($506 million) or 30 pence per share to shareholders in 2021.
Aberdeen-headquartered FirstGroup began the sale process for the FirstStudent and FirstTransit businesses a year ago, following pressure from major shareholder Coast Capital Management.
Its popular Greyhound intercity coach service was also put up for sale in 2019 but the company has yet to find a buyer.
The company, which like other transport operators has seen a collapse in passenger numbers due to pandemic restrictions and school closures, guided to annual profit of more than 900 million pounds.
“As economies begin to emerge from the pandemic restrictions and society begins the process of building back better, the vital role of public transport is clear,” Chief Executive Matthew Gregory said.
The two units being divested reported annual revenues of $3.8 billion, accounting for 60% of group operating profit, in the full year prior to the sale announcement.
“We see the disposal as a clear positive, allowing the group to be simplified, with reduced leverage and legacy liabilities addressed,” Liberum analysts said.
Sky News first reported here the divestment late on Thursday.
FirstStudent, one of the largest school bus operators in the United States, has around 43,000 yellow school buses. FirstTransit, a private contractors of public transport services, owns or operates more than 14,000 vehicles.
($1 = 0.7215 pounds)
Reporting by Yadarisa Shabong, Kanishka Singh and Sabahatjahan Contractor in Bengaluru; Editing by John Stonestreet and Elaine Hardcastle
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April 23, 2021 at 01:38PM
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