‘Separation’ process begins as conclusion reached that UK Bus has ‘limited synergies’ with rest of group
FirstGroup has signalled the likely sale of its UK Bus arm, although it says the development is not a result of concerted pressure from New York-based activist shareholder Coast Capital Management.
In a strategy update from CEO Matthew Gregory at the same time that the group’s annual results to 31 March were revealed, FirstGroup confirmed that it is pursuing “structural alternatives to separate our First Bus operations.”
The separation has been “many months in the making,” and it is part of the group’s plan to focus on its North American First Student and First Transit operations. Sale of the Greyhound subsidiary there has already commenced.
Although UK Bus margins improved to 7.5% in 2019, First says that it has “limited synergies with our other operations.” Separation will allow continuation on the path towards increased profitability in UK Bus and deliver value to shareholders, it adds.
Little definite is known about what the separation process, which is at its early stages, will entail. A senior figure within First UK Bus has suggested that it will become clearer in coming weeks. No suggestion has been made that First will close any of its UK Bus subsidiaries.
In a statement to staff, UK Bus MD Giles Fearnley says: “First Bus leads the industry in many areas, notably technology. That puts us on a much stronger footing, and I believe that this is the right time to pursue alternative options that will provide the best possible future for the business.
“Our commitment to our customers, local authority partners and our suppliers does not change. Nothing in our strategy, plans or expectations has. It is very much business as usual.” First says that “the vast majority” of employees of Greyhound and UK Bus are likely to stay with those businesses once the processes are complete.
