ACTIVIST investor Thomas Sandell has reduced his holding in FirstGroup to less than three per cent.

It is not yet clear whether the New York-based Mr Sandell, who runs Sandell Asset Management and Sandell Investment Services, has softened his stance on the transport operator.

For the past 12 months he has been critical of the Aberdeen company and had suggested it sell its Greyhound coach and school bus business in the United States.

Mr Sandell has also suggested the pay awards made to FirstGroup chief executive Tim O'Toole were rewards for failure.

He drummed up enough support from other investors to see a 25 per cent vote against the remuneration awards at FirstGroup's annual general meeting in July.

But yesterday it was revealed Mr Sandell's holding in FirstGroup has been reduced.

A stock market notification stated almost 1.65 mill-ion shares had been sold, taking the Sandell fund's stake to 2.98 per cent, or around 35.9 million shares.

While the price of the shares sold was not revealed, FirstGroup's stock was trading at between 121p and 124p on Tuesday when the stake was offloaded.

That means the Sandell funds may have realised more than £2m from the sale of the shares.

In recent months, FirstGroup has lost the Scotrail and Caledonian Sleeper franchises but believes its turnaround process is on track. It returned an £8.8m statutory profit in the first six months of its financial year.

FirstGroup shares closed up yesterday, rising 0.1p, or 0.08 per cent to 121.4p.