UK-based train and bus operator FirstGroup has turned down a £1.2bn takeover proposal from US private equity firm I Squared Capital, as it considered the offer too low.
After evaluation, the company said that the 118p a share cash offer “significantly undervalues” its continuing business as well as its future prospects.
FirstGroup also noted that a conditional portion of the proposal, which includes up to a further 45.6p a share, does not offer investors “sufficient certainty.”
Subsequently, the board has unanimously dismissed the offer, FirstGroup said.
Earlier, FirstGroup’s largest shareholder Schroders with an interest of around 18% also snubbed the offer, terming it unattractive.
Speaking to The Sunday Times, Schroders UK equity fund manager Andy Simpson 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 sheet and a depressed valuation.”
With around 17,500 employees, FirstGroup operates four of the UK’s rail networks under franchises allocated by the government.
These networks include Great Western Railway, South Western Railway, TransPennine Express, and Avanti West Coast.
The company also operates Hull Trains and Lumo on the east coast between London and Edinburgh, as well as two “open access” operations that run trains on a commercial basis without franchises.
In 2020, FirstGroup received a direct Award from the UK’s Department for Transport (DfT) for the continued operation of the Great Western Railway (GWR).
Valid until 31 March 2023, the contract can be extended by another year at the discretion of the DfT. The agreement is said to provide a risk and reward balance between FirstGroup and the UK Government.
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