FirstGroup activist investor launches another attack
9 March 2020, 12:14
Coast Capital, which has a 10% stake in the Great Western Railway owner, is demanding bosses spin off the North America division now.
An activist investor who failed to overhaul the board of train and bus operator FirstGroup has launched a second attack on the company.
Coast Capital, which has a 10% stake in FirstGroup, has accused bosses of failing to properly engage on its plans to sell the company’s North American bus and coach division.
The investor said: “Since the announced ‘strategic review’ of the North American operations three months ago, shareholders have heard nothing from the company or its board, and the share price has declined by 20%.”
Shares have fallen, although the entire stock market is suffering due to plummeting oil prices and the coronavirus outbreak.
It added that “unless the board announces a separation” Coast will demand a special shareholder meeting for investors “to vote on an immediate de-merger of the North American operations”.
FirstGroup, which operates Great Western Railway, South Western Railway, TransPennine Express and Avanti West Coast, said in December a formal sale of its US businesses was under way.
First Student and First Transit are set for the chop and it follows an existing plan to offload its Greyhound coach business, the company has previously said.
But since then, there has been no update or identification of a potential buyer, although the company is due to update the stock market on Wednesday in a scheduled announcement.
Coast made clear it wanted a sale quickly to “realise value from these businesses” – by handing the cash to shareholders.
FirstGroup has struggled to appease investors in recent months, with the boardroom changing its position over major decisions.
Initially, Coast Capital attempted to install several new board members by calling for a special shareholder meeting. Investors rejected the plans, but FirstGroup decided to install a new chairman from Coast’s initial list of replacements anyway.
David Martin took over from Wolfhart Hauser as chair – the latter standing down following the investor meeting, where the media was banned, after nearly a third of investors voted against him.
Since starting, Mr Martin initially said the US divisions were “valuable assets and well positioned in markets with profitable growth”.
But following a separate attack from businessman Robert Tchenguiz, who has an economic interest in FirstGroup, the company changed its mind and put the divisions on the block.
Another plan to sell the UK bus business was also reversed with the company saying at the time: “The board (is) determined that greater value will be achieved by delivering… margin enhancement prior to any launch of a formal sale process.”
A spokesman for the company said: “FirstGroup notes the announcement by Coast Capital today.
“The Group will be publishing a scheduled update on Wednesday March 11, and looks forward to updating the market on trading since its half-year results in November as well as the progress of the strategic plans to unlock value for all shareholders, including in relation to our North American contract businesses.”