FirstGroup agreed to sell its First Student and First Transit US bus businesses for £3.3bn and said annual profit would beat expectations.
FirstGroup said the sale to EQT Infrastructure recognised the value of the businesses with a headline multiple of 8.9 times combined 2020 earnings and would leave it as a UK-focused business.
Adjusted operating profit for the 2021 financial year will beat management’s expectations, the transport group added.
FirstGroup said it would use £2.19bn of initial net proceeds to cut debt, pay into its pension schemes and return £365m to shareholders.
The company will use about £1.35bn to reduce debt, including £300m of Covid-19 finance to the UK, and reduce risk from other liabilities. It will also pay £336m into UK Bus and group pension schemes, shifting them to a low-dependence funding position.
Shareholders will receive £365m, or 30p a share, during 2021 with the potential for further payouts.
David Martin, FirstGroup’s chairman, said: “This transaction, which follows a strategic review by the Board of all options to unlock value, enables FirstGroup to address its long-standing liabilities, make a substantial contribution to its UK Bus and group pension schemes and return value to shareholders, while ensuring the ongoing business has the appropriate financial strength and flexibility to deliver on its goals.”
