Scottish transport giant FirstGroup confirm they are speaking to “a number of credible potential buyers” as part of North American divestment plans.
The Aberdeen-headquartered company is trying to sell its First Student and First Transit operations across the Atlantic.
Its iconic Greyhound coach business, connecting cities throughout the US and Canada, and acquired by FirstGroup in a £1.9 billion deal in 2007, is also up for sale.
Shedding these three divisions will leave FirstGroup to focus on bus and rail operations in the UK.
First Student is the largest provider of home-to-school student transport in the US and Canada, with a fleet of 42,500 yellow school buses. First Transit is one of the largest providers of outsourced transit management and contracting services in North America.
Announcing first half results yesterday, FTSE 250-listed FirstGroup said: “We continue to progress our plans to rationalise the portfolio as the best means to unlock material value for all shareholders.
“With respect to the divestment of our North American contract businesses, we are in discussions with a number of credible potential buyers who have a long-term perspective, which the company and our advisers are exploring and evaluating.
“With respect to the sale of Greyhound, we remain in discussions, alongside our actions to manage capacity in response to demand and secure further inter-city bus funding grants.
“In the meantime, we continue to rationalise our property portfolio for value, reducing our footprint by moving operations to facilities better tailored to our needs.”
The company also revealed it is negotiating a new deal to run west coast inter-city train services between Scotland and London after an emergency recovery measures agreement (ERMA) ends in March 2022.
ERMAs were introduced earlier this year to help keep trains running during the Covid-19 crisis, and as a stop-gap measure as the UK Government seeks to replace the 24-year-old franchising model for running Britain’s railways.
FirstGroup also has ERMAs for its TransPennine Express, South Western Railway (SWR) and Great Western Railway businesses.
It has just struck a deal with the Department for Transport (DfT) to exit the pre-existing franchises for its Avanti operation – the west coast services from Scotland to London – and SWR at the end of their ERMAs.
FirstGroup, which will pay a £33.2m “termination sum” for SWR but nothing to quit the Avanti franchise, said: “We are now negotiating new directly awarded management contracts with the DfT, which will come into effect at the end of the ERMAs.
“The DfT have indicated that these new national rail contracts would last to April 1 2023 for SWR, and to April 1 2026 for Avanti, each with extension periods of up to two further years at the DfT’s discretion.”
FirstGroup chief executive Matthew Gregory added: “We welcome this agreement, which marks a further evolution of the contractual framework for our SWR and Avanti train operating companies, both in the context of providing resilient services throughout the coronavirus pandemic and also a more sustainable long-term approach.
“These new directly awarded management contracts will focus on passengers and operational performance, with a more appropriate balance of risk and reward. We look forward to working constructively with the DfT to make this a reality, and to use our expertise and understanding of the needs of our customers to deliver improvements.”
FirstGroup narrowed pre-tax losses to £100.1m during the six months to September 30, from £187.1m a year ago, helped by “strong cost control”.
But revenue tumbled more than £400m to £3.1 billion due to a “substantial reduction in passenger volumes, reflecting travel restrictions and other pandemic effects”.
Mr Gregory said: “Whilst the outlook remains uncertain due to the pandemic, we performed ahead of our expectations in the first half, have taken prudent action to reinforce the balance sheet and are confident in the resilience of the group.”
