SHARES in FirstGroup have risen eight per cent the day after it snubbed a bid approach as analysts said a cash offer could appeal to shareholders or prompt a radical shake up at the bus and trains giant.
On Wednesday Aberdeen-based FirstGroup said it had received a preliminary and highly conditional indicative proposal from US investment heavyweight Apollo relating to a possible cash offer, which directors believed undervalued the company and was opportunistic.
Joe Spooner at Jefferies International told clients yesterday: “After years of management struggling to turn around this group – expect shareholders to be interested to see the proposed terms flushed out, not least because of their reported cash nature.”
Liberum transport analyst Gerald Khoo noted UK Government approval would be required for change of control of rail franchises while FirstGroup’s pension deficit posed complications.
He added: “The approach ought to act as a catalyst for more urgent action by the board to crystallise value and/or for more credit for the potential value of the group being reflected in the share price.”
Damian Brewer at RBC said FirstGroup’s strategic decisions were likely constrained by its debt.
Led by Tim O’Toole, FirstGroup had £1.2bn net debt at the end of the first half.
Shares in the firm closed up 8.3p at 110.1p.
Under takeover rules Apollo has until 5pm on May 9 to make an offer for FirstGroup or walk away for at least six months.
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