FirstGroup activist investor loses fight to block US sale

School buses are seen parked at First Student Charter Bus Rental in San Francisco, California, U.S., April 7, 2020. REUTERS/Stephen Lam//File Photo

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  • 61.3% of votes cast 3.3 billion stg sale of US assets
  • The two main shareholders opposed the agreement
  • FirstGroup focuses on its UK business

May 27 (Reuters) – A majority of FirstGroup (FGP.L) Shareholders on Thursday backed the bus and train company’s 3.3 billion pound ($4.7 billion) sale of its US assets to EQT Infrastructure, in a blow to activist investor Coast Capital which led opposition to the deal.

Some 61.3% of votes cast at the shareholders’ meeting backed the sale of FirstGroup’s largest divisions, whose businesses include operating thousands of yellow school buses. British society needed the support of at least half of all votes cast.

Lead investor Coast launched a campaign a few weeks ago to block the sale to the Swedish private equity fund, arguing it was undervaluing the assets, and demanded that FirstGroup return more of the proceeds to shareholders.

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US hedge fund Coast was joined by number two shareholder Schroders in the minority opposing the deal on Thursday.

FirstGroup, which plans to use most of the proceeds from the sale to pay down debt and contribute to its UK pension schemes, has earmarked £365m for distribution to shareholders.

Peel Hunt analyst Alexander Paterson said more could be distributed to investors as the group’s new Transpennine Express contract in the north of England was much cheaper than a worst-case scenario.

FirstGroup plans to convene a general meeting, if necessary, after the deal closes to seek investor approval on the proposed return of cash to shareholders.

“A share buyback may be more tax efficient or preferable to some shareholders and if that is the route chosen, it would likely require a shareholder vote,” Paterson said.

The deal is expected to close in the second half of this year.

While EQT welcomed the vote, Coast founding partner James Rasteh said he was concerned that other shareholders made their decision without full information and that the fund was considering its options.

With the sale of First Student and First Transit, the Aberdeen-based company will focus on its UK networks.

It is also still looking for a buyer for its Greyhound bus operations in the United States.

Coast had been pressuring FirstGroup to sell its US assets since 2019, with FirstGroup finally entering a formal sale process in early 2020.

Thursday’s result marks a second failure for Coast, which in 2019 unsuccessfully tried to oust former FirstGroup chairman Wolfhart Hauser and reshuffle the board.

Shares of the London-listed company, which have risen little since announcing the sale last month, rose 0.4% at 1520 GMT.

($1 = 0.7057 pounds)

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Reporting by Yadarisa Shabong in Bengaluru; Editing by Krishna Chandra Eluri

Our standards: The Thomson Reuters Trust Principles.

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