Britain’s FirstGroup shake-up to unleash Greyhound coaches

(Reuters) – Britain’s FirstGroup plans to sell U.S. coach service Greyhound and spin-off its First Bus operations in an attempt to head off shareholder pressure, lifting its share price by 13% on Thursday.

FirstGroup, which also runs tens of thousands of yellow school buses in the United States, has blamed competition from low cost airlines for the poor performance of Greyhound, which it has owned since 2007.

Greyhound had launched a review of Greyhound, the only operator of scheduled intercity coaches in North America which carries around 17 million passengers a year, while withdrawing from Western Canada and selling a facility in Chicago.

“Greyhound has limited synergies with our other, predominantly contract-based, North American businesses and we believe that value for shareholders can best be delivered by seeking new owners,” FirstGroup said in a statement.

Its emphasis will now be on First Student and First Transit, its core contracting businesses in North America.

FirstGroup, which replaced its chief executive last year and has not paid a dividend since 2013, has rejected two approaches from private equity firms and has been targeted by Canadian activist investor West Face Capital.

Coast Capital, its second-largest shareholder, has been seeking to replace six of its eleven directors.

The transport company reported a smaller statutory pretax loss of 97.9 million pounds ($123 million) for the year ended March 31, compared to a loss of 326.9 million pounds last year.

FirstGroup, whose shares fell by 23.3% in 2018, also cast doubt on its future in British railways, saying it had “reduced expectations” for its two most recently awarded franchises due to timetabling, infrastructure issues and strike action.

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

FirstGroup’s shares up 12% to 123.9 pence at 0740 GMT.

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