FirstGroup has rejected pressure from a US investor to sell-off its North American bus business in a bid to boost shareholder value.
New York-based hedge fund Sandell Asset Management wrote to the transport group’s board calling for a spin-off and flotation of its US school and transit businesses, and the sale of Greyhound, its intercity bus provider.
Sandell, which has declared a 3.1% holding in FirstGroup, wants the bus and rail operator to use funds from the sale to pay down debt, invest in UK buses and prepare rail franchise bids.
But FirstGroup today snubbed the proposal saying in a statement that the plan was "not compelling" and contained "a number of structural flaws and inaccuracies".
The news comes as FirstGroup’s rival Stagecoach reported a strong set of first half results and underlined the importance of North America to its business.
Stagecoach boss Martin Griffiths said: “I’m very positive on our US business. It’s the fastest growing part of the group. “
Stagecoach operates around 2,600 buses and coaches in North America and revenue at the division jumped 17.2% to $ 238.3m, thanks to a 22% increase in Stagecoach’s Megabus business there.
Griffiths said: “We’re looking at further geographic expansion of Megabus routes and looking at some new products including Megabus gold and potentially thinking about sleeper buses in the longer term.”
However, Griffiths confirmed that a monopoly probe into the transport group’s sight-seeing buses in New York was still on-going.
Across the group Stagecoach saw profit in the six months to the end of October reach £98.5 million, up from £96.8 million a year earlier. Revenue grew from £1.4bn to £1.47bn.
“We’re managing the business well through a period of austerity - we’re still seeing pressure,” Griffiths said.
Profit from Stagecoach’s London bus business was £9.6m, up from £8.3m, although revenues were down.
“The strategy in London is to try and win new contracts, that’s how we’re going to grow the business now,” said Griffiths.
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On rail, Griffiths said the outlook in the UK is “more positive than it has be for a while”, and said Stagecoach were in dialogue with the government on expanding capacity.
Giffiths said he “fully expects” to the group to hit full year profit targets. Stagecoach shares were up 5.7p to 367.5p while FirstGroup shares were up 2.7p at 118.7p.
