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FirstGroup to sell Greyhound as it bows to activist investors

Gwyn Topham Transport correspondent


FirstGroup has announced it will break up its business, sell its US coach line Greyhound, and possibly withdraw from UK rail operations, following pressure from major shareholders.

The Aberdeen-based transport group said it would spin off its profitable UK First Bus operations, as it announced surging revenues but made a £97m pretax loss.

The company said that in future, its core market would be North America, focused on its school bus operations – First Student and First Transit – which generated 60% of operating profits.

Related: FirstGroup’s uncomfortable rail journey isn’t over yet

But Greyhound, which carries about 17 million passengers a year on its scheduled intercity coaches, had “limited synergies” with those businesses, which meant “value for shareholders can best be delivered by seeking new owners”, the company said.

The activist investor Coast Capital, the largest single shareholder with a 10% holding, has been pushing for a separation of the US and UK businesses and to replace the board, having declared First’s strategy – and particularly rail investment – as “extraordinarily destructive of capital”.

That was underscored in First’s full-year results, released on Thursday, when the group took a £102m hit from future losses on its South Western Railway franchise.

The group’s chief executive, Matthew Gregory, said the trading performance was ahead of expectations for the year, but he signalled that First’s long involvement in UK rail could be coming to an end.

“We have concerns with the current balance of risk and reward being offered. We await the outcome of the Williams review as it seeks to address these and other industry issues,” he said.

“Any future commitments to UK rail will need to have an appropriate balance of potential risks and rewards for our shareholders.”

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First is on a shortlist of two for the West Coast Partnership, against a Chinese consortium, for the rights to run intercity trains including the first HS2 high-speed services from 2026.

City analysts broadly welcomed the move. Gerald Khoo of Liberum said: “Moving towards a breakup is positive, but after many years of travelling, arriving is more important than ever. We expect a muted response until there is evidence of progress towards disposals.”

He said the changes went some way towards Coast’s demands, but added: “We doubt they will be satisfied, although we believe the board may have bought itself some time to execute.”