What will happen next with FirstGroup?After the failed takeover bid from American private equity firm Apollo, there’s been the subsequent revelation that one of its shareholders, West Face Capital, had written to the Chairman lambasting the Board for what it sees as chronic underperformance.
West Face Capital wants a strategic review of the business, with three options suggested – a full sale, a break up, or the spin-off of its North American operations.
Certainly, FirstGroup feels like it’s under siege. Whether West Face Capital’s criticisms of underperformance are fair or not, its share price has not seen a stellar performance since a rights issue five years ago. It’s not paying dividends and the share price is 70% lower since Tim O’Toole took over as Chief Executive. You can see why shareholders might be unhappy.
Stagecoach is under the cosh following the collapse of its East Coast rail franchise, an experience that will have been painful given that it’s lost 20% of its market value as a result.
So here we have two big beasts of the public transport sector in difficulty. Will they come out from all of this unscathed? It would feel very strange if the First or Stagecoach brand names vanished from the high street.
You could almost say that First and Stagecoach are iconic brand names in the public transport sector. You see their logos on buses up and down the country.
But I’m probably being melodramatic, as I don’t think anyone is suggesting that either company is about to disappear, even if West Face Capital is pressing the First Group board to consider a break up of the company.
Anyway, West Face Capital only owns 2.5% of the company shares, so I can’t see that it has sufficient clout to impose its will, even if it tends to be somewhat vocal.
Either way, these are uncomfortable times for both companies. It’s a salutary reminder that running large businesses such as these is far from easy, the more so when you are providing public services and the sectors you operate in are very much in the political and media spotlights.
I don’t envy the boards’ and the executive teams’ jobs. And for all those who are quick to criticise performance, especially politicians, I would like to see them do a better job.
There was a certain irony in the timing of the Secretary of State’s statement to the House on 16 May when he announced that he would be taking the East Coast franchise back in-house.
It was the day of the annual Stagecoach Spring reception. I have a hunch that what was doubtless meant to be a joyous occasion was a touch downbeat.