FirstGroup suitor I Squared Capital has pulled out of its acquisition plan for the Aberdeen-headquartered transport business.
Ahead of the Takeover Panel's Thursday deadline for bids, the Miami-based private equity firm delivered a final proposal of 135p per share, with further contingent value from the earn-out of the former First Transit subsidiary in North America.
FirstGroup’s board and advisors concluded that this offer significantly undervalues the business’s continuing operations and future prospects, adding that “the contingent value does not provide shareholders with sufficient certainty”.
I Squared Capital began its pursuit of FirstGroup in May, making several unsolicited and conditional offers - all of which were rejected by the board.
These included an offer at 118p per share and up to 45.6p per share based on the First Transit and First Student earnouts following the sale of those businesses to EQT Infrastructure, as well as the net proceeds of the sale of Greyhound in North America to Flix.
A statement from FirstGroup explained that as a "cash generative, well capitalised business with a significantly de-risked balance sheet and strong positions in the UK bus and rail markets", it has a "resilient and robust platform" from which to develop and maximise both organic and inorganic opportunities.
With new chief executive Graham Sutherland in place, the group also pointed out that there is further value to be realised from non-core businesses, which include the value of the legacy Greyhound assets and residual liabilities, as well as the value of the First Transit earn-out.
"The board is confident the transformation undertaken since the arrival of David Martin as chairman in August 2019 will deliver significant long term value creation for FirstGroup shareholders," read the statement. "The board reaffirms its expectation that, while some uncertainty remains around the pace of recovery in light of the pandemic and the broader macroeconomic backdrop, the group will make significant further progress in the current financial year."
FirstGroup’s share price fell by more than 10% after I Squared Capital’s withdrawal was announced, but has since recovered some of that lost value.
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