First Group: General Discussion

[richw]

What has happened to the American sale off?

Gone quiet on news front, but company email addresses have changed to firstbus dot co dot uk as part of the ongoing seperation

 

[Graham Alexand]

I've got sort of an off topic question but, is there any Streetlites or E400MMC's (or has been) painted in First Barbie livery?
Thanks .

 

[Eyersey468]

I've got sort of an off topic question but, is there any Streetlites or E400MMC's (or has been) painted in First Barbie livery?
Thanks .

Not to my knowledge, I'm sure Barbie livery had started to be phased out by the time the MMCs were launched, though I am not an expert on First so could well be wrong

 

[Goldfish62]

Not to my knowledge, I'm sure Barbie livery had started to be phased out by the time the MMCs were launched, though I am not an expert on First so could well be wrong

Barbie was superceded in 2011, while the Streetlite was introduced in 2010. However, I'm not aware of any orders from First that early. The E400MMC was introduced in 2015.

 

[Eyersey468]

T

Barbie was superceded in 2011, while the Streetlite was introduced in 2010. However, I'm not aware of any orders from First that early. The E400MMC was introduced in 2015.

Thanks, all the pictures of Firsts Streetlites I have seen are in the current livery

 

[TheGrandWazoo]

The trial Streetlites were introduced in 2012 with four used for evaluation. They were all in the then new Urban “Olympia” livery. No Streetlites were in Barbie.

Enviro MMCs were a later development in 2014 so well after the demise of Barbie; Urban was introduced with a substantial batch of 200 new deckers split between Leeds (B9s) and Manchester/Plymouth (old e400) of which some (all?) were used for Olympic shuttles before entering service.

In fact, very few e400s arrived in Barbie as prior to 2012, the B9 was the standard decker. The ones that did arrive were mainly either in dedicated liveries or were hybrids in the silver/pink willow leaf or London red.

 

[Brooke]

Gone quiet on news front, but company email addresses have changed to firstbus dot co dot uk as part of the ongoing seperation

Mark Kleinman (Sky News) reporting that the divestment of the US business will be announced tomorrow.

Tweet here: https://twitter.com/markkleinmansky/status/1385352244032385027?s=21

Exclusive: FirstGroup, the London-listed transport operator, will announce tomorrow the sale of its US-based businesses FirstStudent and FirstTransit to funds managed by EQT Infrastructure for about $4.5bn. Full story on

 

[TheGrandWazoo]

Mark Kleinman (Sky News) reporting that the divestment of the US business will be announced tomorrow.

Tweet here: https://twitter.com/markkleinmansky/status/1385352244032385027?s=21

To these folks https://www.eqtgroup.com/business-segments/real-assets/infrastructure/

 

[overthewater]

How much do you think First has managed to get from this deal? How much will be used to pay down the debts. Thankfully First has not ended up like Toys R us.

 

[TheGrandWazoo]

How do you think First has managed to get from this deal? How much will be used to pay down the debts. Thankfully First has not ended up like Toys R us.

Surely just wait for the announcement? There's no point in guessing what the net benefit price is. Sale is $4.5bn

 

[overthewater]

Details of the sale, worth £3.3Billion. If I was First I would pay down the debt and give something back to the shareholders, but I would look around to see if there are any new business opportunities.

FirstGroup ends long journey to sale of US bus operations with £3.3bn EQT deal

The London-listed transport group will announce the sale of two US divisions on Friday for more than £3bn, Sky News learns.

news.sky.com

FirstGroup ends long journey to sale of US bus operations with £3.3bn EQT deal​

The London-listed transport group will announce the sale of two US divisions on Friday for more than £3bn, Sky News learns.

Tens of thousands of American yellow school buses will be given a new owner on Friday when their London-listed parent announces that it has offloaded them in a deal worth about $4.6bn (£3.3bn).

Sky News has learnt that FirstGroup, which also runs bus and train services in Britain, will announce to the stock market that it has found a buyer for its US-based First Student and First Transit operations.


The new owner is to be EQT Infrastructure, which is affiliated to the Swedish-based private equity firm EQT - whose interest in the business was revealed by Sky News earlier this year.

Banking sources said on Thursday evening that the deal would exceed earlier price expectations and pave the way for hundreds of millions of pounds to be returned to FirstGroup shareholders.

Part of the proceeds will be used to pay down debt, with a chunk of the capital received also likely to be handed to FirstGroup's pension schemes.


The announcement will come more than a year after FirstGroup formally kicked off the auction, which faced significant disruption as a result of the coronavirus pandemic.

First Student operates roughly 43,000 yellow school buses across the US, while First Transit carries hundreds of millions of Americans across its public transport network each year.
The London-listed company came under pressure to offload its US businesses from activist investors, and is understood to be planning to kick off the sale of its Greyhound arm once the deal with EQT Infrastructure is concluded.

FirstGroup has been advised by Rothschild, while Morgan Stanley is thought to have advised EQT Infrastructure.

Neither side would comment ahead of a formal announcement.

 

[Volvodart]

Sale of First Student and First Transit​

https://otp.tools.investis.com/generic/regulatory-story.aspx?newsid=1471079&cid=858

Released : 23.04.2021​

FIRSTGROUP PLC

PROPOSED SALE OF FIRST STUDENT AND FIRST TRANSIT
FirstGroup plc (“FirstGroup” or the “Group”) is pleased to announce that it has entered into an agreement for the sale of First Student and First Transit to EQT Infrastructure (the “Transaction”).
Summary

• c.£3.3bn ($4.6bn) headline enterprise value, including First Transit earnout of up to c.£170m
• Transaction fully recognises the long-term, strategic value of First Student and First Transit – headline multiple of 8.9x combined FY20 EBITDA (on a pre-IFRS 16 basis)
• c.£2,190m initial net proceeds (after deducting First Student and First Transit self-insurance liabilities valued at c.£390m and c.£505m in debt and debt-like items, net working capital and other adjustments) to be used in addressing longstanding liabilities, ensuring the Group has sufficient means for the future development of its retained businesses, and enabling a return of value to shareholders:
• c.£1,345m to be used to reduce indebtedness (including £300m CCFF repayment to UK Government) and to derisk other liabilities (including for North American legacy pensions and self-insurance)
• £336m contribution to the UK Bus and Group pension schemes (of which £116m to be held in escrow), enabling move to low dependency funding position
• c.£100m initial pro forma Retained Group net debt to ensure adequate financial resources are available
• c.£365m proposed return of value (30 pence per share) to shareholders during current calendar year
• Potential for further distributions to shareholders in due course, including following resolution of Greyhound, crystallisation of the First Transit earnout, and as UK end markets recover
• Ongoing FirstGroup will be a leader in public transportation focused on the UK, with a strong platform on which to create sustainable value:
• Well-capitalised and de-risked balance sheet
• Cash generative operating model that will support an attractive dividend
• Critical enabler of economic, social and environmental goals at key inflection point for public transport
• Transaction subject to FirstGroup shareholder approval; circular to be published as soon as practicable
• Sale completion expected in calendar H2 2021 following North American regulatory approval timetable
• Recent trading: Group expects adjusted operating profit for the 2021 financial year to be ahead of management’s previous expectations; current liquidity in excess of £900m

David Martin, FirstGroup Chairman said:
“We are delighted to announce the sale of our North American contract divisions First Student and First Transit to EQT Infrastructure for $4.6bn. This transaction, which follows a strategic review by the Board of all options to unlock value, enables FirstGroup to address its long-standing liabilities, make a substantial contribution to its UK Bus and Group pension schemes and return value to shareholders, while ensuring the ongoing business has the appropriate financial strength and flexibility to deliver on its goals.
“On behalf of the Board, I would like to thank all of our employees for their hard work and commitment in dealing with the immense challenges of the past year, and commend the team for delivering on the Board’s strategic objective to rationalise the portfolio.”
Matthew Gregory, FirstGroup Chief Executive said:
“We are pleased to have agreed the sale of First Student and First Transit in a transaction which recognises their full strategic value. Both are resilient, high quality businesses with strong prospects for returning to normal levels of service following the pandemic. Our colleagues at First Student and First Transit have built excellent relationships with their customers over many years, and we are proud of their commitment and expertise. I would like to pay tribute to everyone in these businesses and acknowledge the vital role they play in their communities, both now and for many years to come.
“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. The services we provide are critical to economic activity and social objectives including ‘levelling up’, and play an important role in combating climate change and helping local communities flourish. Going forward, FirstGroup will be a more focused, resilient business that is in a strong position to deliver for bus and rail passengers in the UK, continue investing in its zero-emissions fleet strategy and play a key role in meeting society’s broader ESG goals.”
Investor and analyst briefing
A conference call for investors and analysts will be held at 9:00am today – attendance is by invitation. Please email [email protected] in advance of the call to receive joining details. The presentation to be discussed on the conference call, together with a pdf copy of this announcement, will be available before the call at go to www.firstgroupplc.com/investors/reports-and-presentations.aspx. A playback facility will also be available there in due course.

 

[TheGrandWazoo]

Details of the sale, worth £3.3Billion. If I was First I would pay down the debt and give something back to the shareholders, but I would look around to see if there are any new business opportunities.

FirstGroup ends long journey to sale of US bus operations with £3.3bn EQT deal

The London-listed transport group will announce the sale of two US divisions on Friday for more than £3bn, Sky News learns.

news.sky.com

That is partly what they will do. About 1/3 of the proceeds are swallowed up existing debt and liabilities. The remainder is being used to reduce debt (£1.35bn) whilst £336m is being used to shore up the pension scheme, £365m to shareholders (30p/share) and £100m being used for improved working capital

I don't think they'll be buying anything soon!

 

[Surreyman]

GrandWazoo

Sounds like you might be receiving a few pennies!
Better than bouncing across Marlow bridge......

 

[baza585]

As always the devil will be in the detail, and they couldn't get rid of Greyhound at the same time, but credit to David Martin and board for doing what they said they would in difficult times.

Not enough detail yet to judge whether price obtained is a good deal.

 

[Robertj21a]

So it took David Martin from Arriva to be recruited, in order to finally sort out First.
Amazing.

 

[Volvodart]

That is partly what they will do. About 1/3 of the proceeds are swallowed up existing debt and liabilities. The remainder is being used to reduce debt (£1.35bn) whilst £336m is being used to shore up the pension scheme, £365m to shareholders (30p/share) and £100m being used for improved working capital

I don't think they'll be buying anything soon!

Per the presentation:-

https://www.firstgroupplc.com/~/med...st-student-and-first-transit-presentation.pdf

Opportunities from adjacent markets in UK bus and rail and new geographies over time

Also, as has been said before,:-

Resolve underperforming locations post-pandemic

▪ Possible that post-pandemic passenger demand may no longer support viable commercial operations on some routes

▪ Local Authority engagement under Enhanced Partnership or franchising structure to explore options for such routes under new National Bus Strategy funding mechanisms

▪ Route/location reductions may also need to be considered

The thing that is holding up the Greyhound sale is a "legacy issue". I presume it is some type of liability. As they have never announced Greyhound cannot be sold, they must be going to deal with it somehow. It could be time limited, or perhaps the property sales are to enable them do something about it so a sale can go ahead.

This is enumerated in the presentation today:-

c.$250m of the Transaction sale proceeds will be utilised to buy out legacy pension and de-risk self-insurance liabilities associated with Greyhound

 

[TheGrandWazoo]

GrandWazoo

Sounds like you might be receiving a few pennies!
Better than bouncing across Marlow bridge......

Indeed though I always felt I was on solid ground in respect of Marlow It's a relief for the good people of that town (and me).

As always the devil will be in the detail, and they couldn't get rid of Greyhound at the same time, but credit to David Martin and board for doing what they said they would in difficult times.

Not enough detail yet to judge whether price obtained is a good deal.

It looks like Greyhound has a few legacy issues and probably isn't what EQT wanted either

So it took David Martin from Arriva to be recruited, in order to finally sort out First.
Amazing.

The problem was that Tim O'Toole didn't want to break the group up but in the end, the pressure from Coast and other investors became too great. It was something that I was agnostic about 10 years ago (aside from getting rid of Greyhound) but over the last 5 years, it became clear that the group needed to get itself back to a slimmed-down operation and a UK/US split was appropriate.

Aside from the nuggets that @Volvodart picked out, you have the £90m/year to be spent on vehicles so c.300/year (?) and that they will look to focus on growing the business with more B2B contracts (guess that's more college, events and rail stuff in the main). Also, the view of growing bus services internationally over time - wonder if that's a nod to tendering for cost plus operating contracts in Europe?

However, the impact of Covid is naturally changing the landscape so will see what happens with their operations. I'm surprised that no-one spotted that Buses of Somerset appears to have been missed off the bus map - cue the conspiracies....

 

[winston270twm]

That is partly what they will do. About 1/3 of the proceeds are swallowed up existing debt and liabilities. The remainder is being used to reduce debt (£1.35bn) whilst £336m is being used to shore up the pension scheme, £365m to shareholders (30p/share) and £100m being used for improved working capital

I don't think they'll be buying anything soon!

Indeed TGW,

Whilst it's good to see a deal finally being concluded and First Group can finally draw a line under it all, in doing so, they've sacrificed their most profitable business & the sale proceeds will leave them very little to replace the group profit / turnover element they've just sold.

At best, it will be small bolt-on acquisitions within the UK at least, to make existing businesses more profitable in the medium term.

Surprised the stock market has reacted more favorably to the news, but it must currently be difficult to put a value of remaining businesses.

 

[TheGrandWazoo]

Indeed TGW,

Whilst it's good to see a deal finally being concluded and First Group can finally draw a line under it all, in doing so, they've sacrificed their most profitable business & the sale proceeds will leave them very little to replace the group profit / turnover element they've just sold.

At best, it will be small bolt-on acquisitions within the UK at least, to make existing businesses more profitable in the medium term.

Surprised the stock market has reacted more favorably to the news, but it must currently be difficult to put a value of remaining businesses.

True Winston - I guess the focus has to be on getting the bus business both secured post Covid and in the light of the changes in partnerships etc, and trying to get the margin higher. There may be the odd opportunist purchase but, in truth, I'm not expecting too much.

At least, with rail, part of the pain is gone with DfT direct contracts. It's capital light but low margin.

One wonders what Moir is thinking at this? Or perhaps he's just happy feeding his prize bullocks....

 

[Robertj21a]

I always felt that Moir didn't really accept his involvement in the debacle. One guy shouldn't have been able to have such an impact on a FTSE company - the Directors were clearly poor as well.

 

[M803UYA]

I always felt that Moir didn't really accept his involvement in the debacle. One guy shouldn't have been able to have such an impact on a FTSE company - the Directors were clearly poor as well.

True, but who wanted to argue with Moir? Anyone doing so quickly found themselves in need of a new employer, therefore boat rocking wouldn't have been part of the company culture.

 

[Robertj21a]

True, but who wanted to argue with Moir? Anyone doing so quickly found themselves in need of a new employer, therefore boat rocking wouldn't have been part of the company culture.

But that's what Directors are there for, not to simply pander to, or be scared of the boss. They are there to protect investors.

 

[TheGrandWazoo]

But that's what Directors are there for, not to simply pander to, or be scared of the boss. They are there to protect investors.

Indeed - it was a failure of collective governance but at the time, dividends were being paid as the share price soared to nearly 600p. That it was unsustainable was perhaps evident to some closer to the bus industry.

Certainly when they bought Laidlaw at precisely the wrong time, they weren’t the only firm to be seduced by cheap available borrowing who then found it a millstone when things changed in 2008/9.

 

[winston270twm]

True Winston - I guess the focus has to be on getting the bus business both secured post Covid and in the light of the changes in partnerships etc, and trying to get the margin higher. There may be the odd opportunist purchase but, in truth, I'm not expecting too much.

At least, with rail, part of the pain is gone with DfT direct contracts. It's capital light but low margin.

One wonders what Moir is thinking at this? Or perhaps he's just happy feeding his prize bullocks....

Maybe capital light international expansion through contract wins is their only real expansion option as per NX / Go-Ahead & potentially Stagecoach.

That said, I still wouldn't DB having to make larger sell off's from their Arriva UK portfolio either or international

Whilst on the subject of bullocks, Moir's entire plan for First Group was a load of bullocks.... how the mighty have fallen!

 

[317 forever]

Maybe capital light international expansion through contract wins is their only real expansion option as per NX / Go-Ahead & potentially Stagecoach.

That said, I still wouldn't DB having to make larger sell off's from their Arriva UK portfolio either or international

Whilst on the subject of bullocks, Moir's entire plan for First Group was a load of bullocks.... how the mighty have fallen!

That was an example of a company that First have never bought.

The economics or even American law might not allow this, but I wonder whether they could just give a suitable notice period to close Greyhound if they do not receive any suitable bids.

 

[overthewater]

What about Chapter 11? that would be another way to get rid of the company.

 

[TheGrandWazoo]

Now that First is divesting their US operations and are focusing (in the near to medium term) on the UK, I wonder what the future is of their remaining Greater Manchester business. This is primarily Oldham depot, which has been hit hard in recent years with the reduction in trade after Metrolink's expansion, and it was up for sale at the same time as Bolton and Queens Road; in fact, I believe a buyer was lined up but subsequently withdrew. It seemed that there was a battening down of the hatches instead with services trimmed; the operations are now operated by a fairly middle-aged contingent of e300/e400 with a number of older B9s but nothing since 2014.

The other operation is the Vantage BRT operation that ran out of Bolton but Rotala weren't prepared to take on the operation. Again, I understand that this was because it was loss-making, so after toying with running it from a reopened Rusholme depot, they are instead tenants of Arriva in Bolton.

In the recent accounts for 2019/20, there is the interesting statement that there was an onerous contract provision made (can it be other than Vantage?) but that it is now expected that in the current period, the area of the business affected by this will be sold.

So, given all this and the background of franchising in Manchester, I wonder what is the future of these remaining bits of First GM?

 

[Volvodart]

Are the Vantage routes part of the franchising scheme? There was supposed to be electric buses coming for it too, by now.

 

[TheGrandWazoo]

Are the Vantage routes part of the franchising scheme? There was supposed to be electric buses coming for it too, by now.

Everything will go under the franchising scheme. I think the current 10 year contract runs until 2025. I don't know the specifics but if First are losing money on it, I guess they are operating on a closed book basis (they have to provide a level of service in the tender but the commercial risk is with them), rather than a cost plus contract.

I had a quick google and there was an award to TfGM for 23 electric vehicles for Vantage. This was in Feb 2019 but don't know what happened to that. There was also an award to First for the 582 but they sold Bolton depot soon after.