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FirstGroup shareholder Coast Capital urges demerger of NA businesses
9th Mar 2020 11:30
(Sharecast News) - FirstGroup shareholder Coast Capital said on Monday that it was planning to requisition an extraordinary general meeting to seek the demerger of the company's North American businesses.
The hedge fund, which owns a stake of more than 10%, wants FirstGroup to demerge First Student and First Transit from its UK operations, "ensuring the release of full value to investors, and the sound development of businesses with no synergies between them".
FirstGroup announced in December that it had appointed advisors to formally explore all options with regards to its North American contract businesses. However, there have been no updates since then and the share price has slumped 20%, Coast said.
"Unless the board announces a separation, Coast Capital intends to requisition an EGM in order to provide investors with the opportunity to vote on an immediate de-merger of the North American operations," it said.
"Coast Capital believes that in the absence of a full divestment notably above book value, the company must pursue a listing of these businesses on a North American exchange and the LSE. This will allow UK investors to realize value from their investment in the company, and enable new North American investors, public or private, to buy into the North American operations. Furthermore, the management teams, employees, and clients of North American operations can only benefit from a reinvigorated investor base which will invest in and help grow the operations."
The hedge fund estimates that the NA businesses will generate $580m or ?450m in EBITDA this fiscal year, which at book value of ?2.8bn would equate to a valuation of 6.2x EV/EBITDA.
FirstGroup put out a brief statement in response to Coast Capital's announcement, saying "there is material value to be unlocked" within the group and it is "intent on delivering this in the best interests of all shareholders".
The company said it will update investors on trading since its half-year results in November in its scheduled statement on Wednesday, and on the progress of its strategic plans, including plans for its NA contract businesses.
The hedge fund, which owns a stake of more than 10%, wants FirstGroup to demerge First Student and First Transit from its UK operations, "ensuring the release of full value to investors, and the sound development of businesses with no synergies between them".
FirstGroup announced in December that it had appointed advisors to formally explore all options with regards to its North American contract businesses. However, there have been no updates since then and the share price has slumped 20%, Coast said.
"Unless the board announces a separation, Coast Capital intends to requisition an EGM in order to provide investors with the opportunity to vote on an immediate de-merger of the North American operations," it said.
"Coast Capital believes that in the absence of a full divestment notably above book value, the company must pursue a listing of these businesses on a North American exchange and the LSE. This will allow UK investors to realize value from their investment in the company, and enable new North American investors, public or private, to buy into the North American operations. Furthermore, the management teams, employees, and clients of North American operations can only benefit from a reinvigorated investor base which will invest in and help grow the operations."
The hedge fund estimates that the NA businesses will generate $580m or ?450m in EBITDA this fiscal year, which at book value of ?2.8bn would equate to a valuation of 6.2x EV/EBITDA.
FirstGroup put out a brief statement in response to Coast Capital's announcement, saying "there is material value to be unlocked" within the group and it is "intent on delivering this in the best interests of all shareholders".
The company said it will update investors on trading since its half-year results in November in its scheduled statement on Wednesday, and on the progress of its strategic plans, including plans for its NA contract businesses.