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Re: COAST CAPITAL STATEMENT
FirstGroup plc (‘FirstGroup’ or the ‘Group’) notes the statement by Coast Capital LLC in relation to the agreed sale of First Student and First Transit to EQT Infrastructure announced on 23 April 2021 (the 'Sale'). The Coast Capital statement contains numerous inaccuracies and speculations which the Board would like to correct.
The Sale followed a comprehensive and competitive process in order to seek the best possible price for First Student and First Transit, which was well-publicised for more than a year (having been announced in March 2020). Through the sale process, the businesses were widely marketed and the Group and its advisers actively engaged with more than 40 potential buyers. The exclusivity arrangements included in the sale agreement signed with EQT are in line with standard US practice, particularly following an extended and broad sale process. The Board is aware of its fiduciary responsibilities to shareholders and continues to comply with them at all times.
This process overseen by the Board led to the agreed Sale for a full strategic value, which looks beyond the pandemic and reflects the high quality and long-term nature of these assets. The Group notes that the Sale is described by Coast Capital as "at a significant negative premium to book value", however the net proceeds on sale are above book value as at 30 September 2020.
In the context of a competitive process to extract the most attractive proposal, an earnout structure was agreed for First Transit which would benefit continuing shareholders in the Group. This reflects First Transit’s strong prospects for future performance, not least in light of the Biden Administration's commitments to investment in infrastructure and public transportation. Under the earnout FirstGroup will receive up to a further £170m, payable on the third anniversary of the Sale (following an independent valuation), or sooner if sold to a third party.
The Group has a number of longstanding liabilities. As previously set out, in determining the use of proceeds the Board has sought to balance returning value to shareholders while also making a necessary and substantial contribution to the UK pension deficit, reducing its debt (including repayment of Covid Corporate Financing Facility to the UK government) and addressing other longstanding liabilities. In parallel, the Board carefully considered the appropriate capital structure and distribution policy for the ongoing Group, and it concluded that a well-capitalised, de-risked balance sheet will provide the retained group with flexibility to navigate end market uncertainty at this point in the pandemic recovery, pursue its strategy going forward and support a progressive annual dividend from 2023.
At the same time, the Board has committed to keep the balance sheet position of the retained group under review and will consider the potential for making further additional distributions to continuing shareholders, in addition to the proposed return of value to shareholders described in the Sale announcement and circular.
As previously stated, the Group is consulting with major shareholders as to the most appropriate distribution mechanism for the return of value to FirstGroup shareholders. Full details of the proposed return of value described in the circular will be made available shortly following completion of the Sale. The Group would also note that the shareholder approval process for the transaction with EQT, including the timetable, is entirely in line with company law and market practice for a UK listed company.
The Group, including the Chairman, has consistently engaged with Coast Capital over several years, carefully considered their proposals and followed up with introductions they proposed. The Group has also sought to correct a number of inaccurate assertions, many of which appear in Coast Capital's statement of 17 May 2021. Several such points were directly addressed within the circular approved by the Financial Conduct Authority that was sent to all FirstGroup shareholders on 10 May 2021.
The Board has received financial advice from Rothschild & Co, J.P. Morgan Cazenove and Goldman Sachs in relation to the Sale. The Board unanimously recommends the transaction as being in the best interests of all shareholders and recommends shareholders vote in favour of the Sale at the General Meeting on 27 May.
Contacts at FirstGroup:
Faisal Tabbah, Head of Investor Relations
Stuart Butchers, Group Head of Communications
+44 (0) 20 7725 3354
Contacts at Brunswick PR:
Andrew Porter / Simone Selzer, Tel: +44 (0) 20 7404 5959
Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR 6 Annex 1R: 3.1. FirstGroup plc (LSE: FGP.L) is a leading provider of transport services in the UK and North America. With £7.8bn in revenue in the year to 31 March 2020 and around 100,000 employees, we transported 2.1bn passengers. Whether for business, education, health, social or recreation – we get our customers where they want to be, when they want to be there. We create solutions that reduce complexity, making travel smoother and life easier. We provide easy and convenient mobility, improving quality of life by connecting people and communities. Visit our website at www.firstgroupplc.com and follow us @firstgroupplc on Twitter.