Private equity firm Coast Capital has today doubled down on its campaign against the sale of First Group’s two American businesses.
The firm says that the $4.6bn (£3.3bn) deal for First Student and First Transit significantly undervalues the businesses.
The renewed rebellion comes ahead of Thursday’s crunch general meeting, when investors will vote on the deal.
Coast Capital has long been in favour of spinning off the US assets, but has led the opposition to the existing deal, which will see the businesses taken over by EQT Infrastructure.
But documents seen by the Telegraph today suggested that the New York-based firm had previously been in favour of the deal in its current form. City A.M. has contacted the firm for comment on the report.
First Group hit back against Coast’s criticisms, saying that the deal would put it in a “strong position” to deliver on its future plans.
The sale process was first kicked off over a year ago, with more than 40 companies expressing interest in snapping up the divisions. 10 bidders were taken through to the final round.
In a statement released today, Coast Capital said: “A sale of these best-in class public transport operations through a rushed and unexhaustive process in the middle of the largest pandemic in 100 years, at a significantly lower valuation than any comparable transaction, and for less than what FirstGroup acquired First Student & First Transit for 14 years ago, is unacceptable.
“A vote in favor of this destructive transaction is a clear breach of shareholders’ fiduciary responsibility.”
“In conclusion, unless the deal terms are materially improved upon, along with proposed use of proceeds, Coast Capital urges its fellow investors to vote against this destructive proposal”, Coast added.
“Many more attractive proposals are available to shareholders which we believe will be presented for shareholders to consider – but only if we vote against this inadequate EQT bid.”
Before a deal was struck, UBS analysts valued First Student and First Transit at £2.8bn, 12 per cent lower than the final deal. Jefferies also said that the final price was higher than expected.
Coast Capital, which owns nearly 14 per cent of First Group and is the firm’s largest shareholder, has been joined in its opposition by Schroder’s.
Proxy adviser Glass Lewis has also thrown its weight behind the revolt. In a statement, it said: “We tend to agree with Coast when it says any sale or carve out of these U.S. businesses would be better done after a return to normalcy in the U.S., in order to maximize value.”
However, three other investor advisory groups, including ISS, have backed the deal.
In a statement, First Group chair David Martin said: “Shareholders have waited long enough for change and this is a credible and executable transaction that is unanimously recommended by the Board.
“The process is entirely in line with market practice for a UK listed company and the Board fully complies with its fiduciary responsibilities at all times.
“This transaction delivers the strategy we publicly set out, and will put the Group in a strong position to move forward to a new and exciting future.”
Shares in the firm rose 2.5 per cent today.