RE: Game on18 May 2021 13:55
FirstGroup plc (‘FirstGroup’ or the ‘Group’) notes the statement by Coast Capital LLC in relation to the agreed sale of First Student and First Transit to EQT Infrastructure announced on 23 April 2021 (the 'Sale'). The Coast Capital statement contains numerous inaccuracies and speculations which the Board would like to correct.
The Sale followed a comprehensive and competitive process in order to seek the best possible price for First Student and First Transit, which was well-publicised for more than a year (having been announced in March 2020). Through the sale process, the businesses were widely marketed and the Group and its advisers actively engaged with more than 40 potential buyers. The exclusivity arrangements included in the sale agreement signed with EQT are in line with standard US practice, particularly following an extended and broad sale process. The Board is aware of its fiduciary responsibilities to shareholders and continues to comply with them at all times.
This process overseen by the Board led to the agreed Sale for a full strategic value, which looks beyond the pandemic and reflects the high quality and long-term nature of these assets. The Group notes that the Sale is described by Coast Capital as "at a significant negative premium to book value", however the net proceeds on sale are above book value as at 30 September 2020.
In the context of a competitive process to extract the most attractive proposal, an earnout structure was agreed for First Transit which would benefit continuing shareholders in the Group. This reflects First Transit’s strong prospects for future performance, not least in light of the Biden Administration's commitments to investment in infrastructure and public transportation. Under the earnout FirstGroup will receive up to a further £170m, payable on the third anniversary of the Sale (following an independent valuation), or sooner if sold to a third party.
The Group has a number of longstanding liabilities. As previously set out, in determining the use of proceeds the Board has sought to balance returning value to shareholders while also making a necessary and substantial contribution to the UK pension deficit, reducing its debt (including repayment of Covid Corporate Financing Facility to the UK government) and addressing other longstanding liabilities. In parallel, the Board carefully considered the appropriate capital structure and distribution policy for the ongoing Group, and it concluded that a well-capitalised, de-risked balance sheet will provide the retained group with flexibility to navigate end market uncertainty at this point in the pandemic recovery, pursue its strategy going forward and support a progressive annual dividend from 2023.
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