FirstGroup rejects activist Sandell's US restructuring proposal

11th Dec 2013 07:31

FirstGroup has rebuffed 'flawed' restructuring proposals from US activist investor Sandell and said it planned to continue on its current strategy. The FTSE 250 bus and rail operator received a letter from hedge fund Sandell Asset Management, which owns around 3% of its shares, with demands that the UK group sell its US businesses in order to pay down debt. But FirstGroup rejected the rationale put forward to sell its Greyhound coach and yellow school bus businesses which were acquired as part of 2007's £1.9bn takeover of troubled US group Laidlaw.Sandell's founder, Tom Sandell, said in the letter that his proposals would help lift the company's shares to 199p from the 116p level they closed at on Tuesday, according to the Financial Times.But in a statement to the market, FirstGroup said: "The group has engaged with Sandell several times, reviewed their proposal in detail and believes that it is not compelling and contains a number of structural flaws and inaccuracies.""The board believes that the current multi-year programme that was set out in May, with clear objectives to improve growth and restore a profile of consistent returns and cash generation, will deliver superior value for shareholders compared to alternatives that were considered in detail earlier this year, and which remain under review." In May the group announced a heavily discounted £615m rights issue to reduce debts, which had topped £2bn since the Laidlaw acquisition. Recent first-half results showed net debt had been cut 31% to £1.45bn and a flat US business despite lower profits and revenues at Greyhound.FirstGroup said it would review its programme in further detail at a capital markets day on January 23rd, where new Chairman John McFarlane will meet institutional investors and analysts. FirstGroup shares jumped 3.45% to 120p in the first minute of trading on Wednesday, having fallen 32% in the year to date, largely due to the May rights issue.OH