FirstGroup turns down call from major investor to sell off North American arm

New York-based Sandell Asset Management, the owner of 3.1 per cent of the company, wants Aberdeen-based First to offload its inter-city bus service Greyhound and spin off the rest of its North American arm, which includes school bus services for six million students.

It believes the changes will strengthen its balance sheet and better prepare the company for the upcoming round of UK rail franchise bids, as well as enabling it to invest in the turnaround of its UK bus arm.

FirstGroup has engaged with Sandell several times but said the proposals were not compelling and contained structural flaws.

It said it is committed to existing plans announced in May under which it will pour £1.6 bn into a four-year investment programme and tackle debts of nearly £2bn. The strategy will look to improve the performance of all divisions, including its Great Western rail arm.

The company, which is due to provide investors with more details of its plans on January 23, said: “We remain focused on the vigorous execution of our strategy.”

Shares rose 3 per cent after Sandell said it would lobby other shareholders to support proposals that it believes will set the company “on the right path to long-term success”.