FirstGroup PLC Statement re: Sale of First Student and First Transit

 
TIDMFGP 
 
FIRSTGROUP PLC 
             STATEMENT RE: SALE OF FIRST STUDENT AND FIRST TRANSIT 
 
FirstGroup plc ('FirstGroup' or the 'Group') notes the further statement by 
Coast Capital LLC on 19 May 2021 in relation to the agreed sale of First 
Student and First Transit to EQT Infrastructure announced on 23 April 2021 (the 
'Sale'). 
 
The Board unanimously believes that this transaction is in the best interests 
of all shareholders and strongly recommends that shareholders vote in favour of 
the Sale. The Board has received financial advice from Rothschild & Co, J.P. 
Morgan Cazenove and Goldman Sachs in relation to the Sale. 
 
The Board welcomes the reports from proxy advisory agencies ISS, IVIS and PIRC 
which also recommend that shareholders support the Sale. 
 
Full details of how to vote are set out in the circular to shareholders 
published on 10 May. 
 
The Board reiterates that: 
 
  * A comprehensive and competitive sale process has been followed which was 
    well publicised for more than a year 
 
  * The Board is therefore confident that the Sale at $4.6bn represents a full 
    strategic value that looks beyond the pandemic and reflects the high 
    quality and long-term nature of these assets 
 
  * In the context of that competitive process, we negotiated a detailed 
    earnout structure for First Transit worth up to $240m. FirstGroup will 
    receive 62.5% of First Transit's value above $380m either on the third 
    anniversary of the Sale or sooner if Transit is sold to a third party 
 
  * The Group, including the Chairman, has consistently engaged with Coast 
    Capital over several years, carefully considered their proposals and 
    followed up on introductions they have proposed 
 
Corrections to Coast Capital's inaccurate statements 
 
Coast Capital's latest statement contains numerous inaccuracies, including in 
relation to the transaction multiples, as explained below. 
 
EBITDA multiple 
 
In the announcement of 23 April, the Group disclosed a transaction multiple of 
8.9x March 2020 EBITDA. Coast Capital's stated alternative EBITDA multiple is 
grossly misleading by 2.4x for the following reasons: 
 
  * it incorrectly compares GBP EBITDA and the USD Sale value at materially 
    different exchange rates ($1.29:£1 and $1.40:£1 respectively) rather than 
    performing the calculation based on the underlying US dollar values which 
    are reported (a difference of 0.6x EBITDA), 
  * is based on post-IFRS 16 financials (a difference of 0.5x EBITDA) but 
    compares to other transactions on pre-IFRS-16 basis, 
  * it excludes any value for the Transit earnout of $240m entirely (while 
    agreeing that First Transit has substantial value in excess of the $380m at 
    which additional value will accrue to the Group - a difference of 0.5x 
    EBITDA), and 
  * It fails to adjust for lower working capital and deferred capital 
    expenditure which lowered the Group's net debt position as at 31 March 2021 
    and transaction costs (a difference of 0.8x EBITDA). 
 
Book value multiple 
 
The Sale is described by Coast Capital as "at a significant negative premium to 
book value". However as previously noted the net proceeds on sale are above 
book value as at 30 September 2020, even before taking account of the Transit 
earnout. Coast Capital's analysis incorrectly uses inconsistent foreign 
exchange rates to compare balance sheet information and transaction values, and 
fails to adjust for cash that will be retained by FirstGroup. Based on the net 
asset values adjusting for net intercompany balances of £2,512m in the 
circular, which were translated at $1.27:£1 and adjusting for cash of £166m 
retained by FirstGroup, the transaction value including the First Transit 
earnout is 1.1x, or 3.3x excluding goodwill of £1,550m. 
 
Peer comparisons 
 
The EV/EBITDA transaction multiple for STA noted by Coast Capital is not 
comparable to the First Student and First Transit Sale because STA had a 
business model with a majority leased fleet resulting in a materially lower 
EBITDA compared with First Student's predominantly owned fleet. 
 
Coast Capital's comparison to other transactions also fails to recognise that 
FirstGroup's book value includes $2.0bn of goodwill. 
 
On reviewing the National Express plc trading multiple as at 1 March 2020 
pre-COVID, FirstGroup has concluded that the implied EV/EBITDA multiple of 
their US school bus and transit business is 6.7x[i], materially lower than the 
multiple achieved by FirstGroup on the Sale. 
 
David Martin, FirstGroup Chairman, said: 
 
"Shareholders have waited long enough for change, and this credible and 
executable transaction is a transformational opportunity for the Group to 
progress to a new and exciting phase of its development. When I joined the 
Board in August 2019, I clearly stated my objective was to unlock the value 
within the Group. Following a full strategic review, we undertook a 
comprehensive and well-publicised sale process, which achieves a full value and 
enables the Group to return value to shareholders, address its legacy 
challenges and strengthen its position for the future." 
 
Contacts at FirstGroup: 
 
Faisal Tabbah, Head of Investor Relations 
Stuart Butchers, Group Head of Communications 
[e-mail] 
[phone] 
 
Contacts at Brunswick PR: 
 
Andrew Porter / Simone Selzer, Tel: [phone] 
 
Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR 
6 Annex 1R: 3.1. 
 
About FirstGroup 
 
FirstGroup plc (LSE: FGP.L) is a leading provider of transport services in the 
UK and North America. With £7.8bn in revenue in the year to 31 March 2020 and 
around 100,000 employees, we transported 2.1bn passengers. Whether for 
business, education, health, social or recreation - we get our customers where 
they want to be, when they want to be there. We create solutions that reduce 
complexity, making travel smoother and life easier. We provide easy and 
convenient mobility, improving quality of life by connecting people and 
communities. Visit our website at www.firstgroupplc.com and follow us 
@firstgroupplc on Twitter. 
 
[i] 6.7x is derived from the National Express 2019 financial statements and 
assumes the Coast Capital multiple of 7x EV/EBITDA for the non-US businesses. 
 
 
 
END 
 
 

(END) Dow Jones Newswires

May 21, 2021 06:07 ET (10:07 GMT)