US-based private equity firm offers no reason for dropping its plans for takeover of transport giant
US private equity fund Apollo Global Management has walked away from plans to make a bid to take over FirstGroup.
On April 11, Apollo made what the Aberdeen-based transport giant describes as two “preliminary and highly conditional indicative proposals… relating to a possible cash offer for the entire issued and to be issued ordinary share capital.”
FirstGroup considered Apollo’s undisclosed proposals “opportunistic” and it believed that they “fundamentally undervalued” the company.
They were accordingly rejected unanimously by its board. British law meant that Apollo then had until 9 May to either make a firm offer for FirstGroup or walk away.
The equity fund has not offered any reasons why it dropped its plans. FirstGroup shares slumped by 10% following Tuesday’s announcement; they had climbed by an initial 7.4% when Apollo’s interest was first disclosed.
FirstGroup’s board says that it “continues to believe in the strong prospects for shareholder value creation available to the company.” The group has not paid a dividend since 2013 and it has lost 40% of its value over that period.
FirstGroup will publish its full year results for the year to 31 March at the end of this month and it will further update on the company’s outlook at that time.
At the time of Apollo’s initial approach, analysts suggested that FirstGroup is undervalued, with recent poor performance having caused the market to overlook its leading or near-leading positions in its main areas of activity. The group currently has a market value of £1.2bn.
However, one analyst added that were it not possible for an organic turnaround of FirstGroup to take place in full, investors would hope for “transactional alternatives to crystallise value, whether initiated by management or external parties.”
Others have added weight to the theory that the cash approach from Apollo could force FirstGroup to act, which may include a break-up of the company.
