FirstGroup agreed to sell two North American bus businesses 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, operating First Bus and four train contracts in Britain, surged as much 19% to hit a more than one year high before paring to trade 8% higher by 1057 GMT.
“We see the disposal as a clear positive, allowing the group to be simplified, with reduced leverage and legacy liabilities addressed,” Liberum analysts said.
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 had net debt of about 2.96 billion pounds ($4.11 billion) as of the end of September 2020.
About 365 million pounds of the receipts from the sale or 30 pence per share has been earmarked to return to shareholders in 2021, it said.
Aberdeen-headquartered FirstGroup began the sale process for the FirstStudent and FirstTransit businesses a year ago, following pressure from major shareholder Coast Capital.
Its popular Greyhound intercity coach service was also put up for sale in 2019 but the company has yet to find a buyer.
EQT said it would invest in operational technology and fleet decarbonisation of the around 43,000 yellow school buses and 14,000 other vehicles owned and operated by the businesses.
FirstGroup, which like other transport operators has seen a collapse in passenger numbers due to pandemic restrictions, on Friday guided to annual profit ahead of its prior expectations.
Shares in FirstGroup have outperformed its UK peers National Express, Stage Coach and Go-Ahead in the past 12 months.
“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,” CEO Matthew Gregory said.
Sky News first reported the divestment late on Thursday.
Source: Reuters.com