FirstGroup faces fresh pressure from rebel investor Sandell

15th Jan 2014 07:51

Activist investor Sandell Asset Management has piled more pressure on troubled UK bus and rail company FirstGroup to sell its US operations.Sandell, which said last year it would lobby other shareholders to force First to hive off its US business and sell First's US long-distance Greyhound coaches, has unveiled a report which it claims shows the operational and financial benefits of its plan, which First rejected.The fund manager, which owns about 3.1% of First, also said it believed there was strong shareholder support for its ideas.It has written to First's board, which is headed by Chief Executive Tim O'Toole, urging it to reconsider its proposals and saying First's rejection of them was "premature". It said the board's arguments against them were "relatively minor".It said its plan would provide stronger and clearer operational focus, better management incentives, shareholder accountability and transparency and extra reinvestment cash. Sandell also said it would result in a better valuation of FirstGroup US, a lower overall cost of capital, reduced debt and lower interest payments.It accused First of "consistently poor execution" of the business, which it blamed on increased complexity since First bought US transport group Laidlaw International.Sandell's Chief Executive Tom Sandell said: "We believe shareholders strongly support our ideas and have been encouraged by their reaction. The board's statement that it remains open to shareholder feedback is encouraging and will allow for constructive and open engagement about ways to improve the company's performance and deliver value to shareholders."PW