The biggest single shareholder in FirstGroup is embroiled in a new row over the Aberdeen-based transport giant after previously trying to oust its board.
But this time Coast Capital’s beef is not with the company, but rather a union which has accused it of “bandit capitalism” for allegedly trying to block moves to substantially reduce the group’s pension deficit.
FirstGroup is selling its North American First Student and First Transit businesses to Swedish private equity group EQT Infrastructure in a £3.3 billion deal, leaving only its iconic Greyhound coach business waiting to be sold across the Atlantic.
Coast Capital is always sensitive to the needs of all stakeholders, as well as the environmental impact of its invested companies.”
Coast Capital statement
New York-based Coast, which owns nearly 14% of FirstGroup, is unhappy with the terms of the deal.
According to the Unite union, which represents thousands of FirstGroup workers, Coast has argued that £360 million of the proceeds should be paid to shareholders as a form of dividend, rather than being used to plug the company’s pension deficit.
Unite’s figure is wrong – FirstGroup has earmarked £336m for its pension schemes after agreeing to sell two of its three businesses in North America.
And Coast denied it was pressuring the company to decrease contributions into the pension plans, or reduce benefits to pensioners.
A statement from the activist investor added: “In fact, more than two years ago we proposed the company engage with a leading UK pension consultancy firm to structure great cash contributions and enhance the schemes for the immediate benefit of all stakeholders.
“Our opposition to the disposal to EQT is based on the transaction’s very unattractive terms, and its crystallization of value destruction for all stakeholders, including pensioners.”
Coast, which had previously sought a demerger of the North American operations in a bitter war of words with FirstGroup, pointed out that some of its clients were pension funds.
It added: “Coast Capital is always sensitive to the needs of all stakeholders, as well as the environmental impact of its invested companies. Reflecting this belief in shared incentives, Coast has invited Unite to discuss areas of mutual interest.”
Unite also highlighted a proposed 10p-a-share payout to shareholders as a result of the asset sale, when in fact the plan is to pay 30p per unit of stock.
The union claimed Coast was seeking to secure the support of other shareholders to oppose the pension payments.
“The actions of Coast Capital are despicable – this is a classic example of bandit capitalism.”
Bobby Morton, Unite
It added: “Unite members are alarmed at the development as there has been growing concern at the size of the pension deficit, with fears that if action isn’t taken workers’ pensions could be placed in jeopardy.
“Unite has long campaigned for tighter rules to be imposed on how companies manage pension fund deficits, and that paying bonuses and shareholder dividends must not be given precedent over pension fund payments.
Unite national officer for passenger transport Bobby Morton said: “The actions of Coast Capital are despicable – this is a classic example of bandit capitalism.
“Coast Capital are trying to line their own pockets, while jeopardising the retirement income of our members.
“First Group are doing the right thing in acting to plug its pension fund deficit and they should not be blocked from taking this responsible action.”
FirstGroup declined to comment.