By Scott Wright

FIRSTGROUP is poised to complete its withdrawal from the US market after agreeing a deal to sell its Greyhound inter-city coach business – more than two years after it was first put on the market.

The Aberdeen transport giant has reached an agreement to sell Greyhound Lines to European bus and rail company FlixMobility for $172 million (£125m). Under the terms of the cash deal, it will receive $140m initially, with a deferred consideration of $32m to be paid over 18 months.

The sale comes more than two years after FirstGroup first moved to reduce its presence across the Atlantic.

In December 2019, it revealed that it had appointed advisors to explore options for its First Student and First Transit businesses following pressure from activist investors.

A sale process for the two businesses was formally launched in March 2020, and they were then sold to EQT Infrastructure, a private equity group, in a deal worth $4.6 billion (£3.3bn) in April this year. FirstGroup said the disposal would allow it to return around £365m to shareholders during the calendar year.

Greyhound had put been up for sale by FirstGroup in May 2019, following a strategic review led by former chief executive Matthew Gregory.

Mr Gregory resigned in July after clashing with US activist investor Coast Capital, which said it had sold First Student and First Transit too cheaply.

FirstGroup effectively acquired the businesses that trade today as Greyhound, First Student and First Transit 14 years ago, when it bought US transport conglomerate Laidlaw. It had run some student buses in the US before then.

FirstGroup said yesterday that the Greyhound deal would leave it free to focus on its UK operations, First Bus and First Rail. First Bus is the second-largest regional bus operator in the UK, with a fleet of around 5,000 vehicles, while First Rail is the country’s largest rail operator, and runs the Avanti West Coast, Great Western Railway, South Western Railway and TransPennine Express contracts.

David Martin, executive chairman of FirstGroup, said: “Greyhound is an iconic business which has been at the heart of North American life for more than a century, through its unique national network which connects communities across the continent.

“We are proud of the significant developments we made to Greyhound’s business model during FirstGroup’s ownership, including the introduction of express point-to-point routes, real-time pricing and yield management and a transformed customer offering and experience.

“This transaction realises an appropriate value for Greyhound’s operations and ensures Greyhound’s legacy liabilities are suitably managed.

"Today’s agreement regarding Greyhound’s future completes the group’s portfolio rationalisation strategy which has refocused FirstGroup on its leading UK public transport businesses with a strong platform to create sustainable value going forward.”

FirstGroup reported it has retained certain net liabilities under the sale agreement, including pension, self-insurance and finance leases settled at closing, which were valued at $320m in March this year, as well as grant receivables, buyout premia and other items estimated at a cost of around $47m.

Against those liabilities, FirstGroup said it will retain Greyhound properties with an estimated net market value of around $176m.

While the properties will initially be leased back to Greyhound at market rates, FirstGroup said it expects to sell them over the next three to five years.

FirstGroup said it had retained $197m of proceeds from the First Student and First Transit disposal against the liabilities relating to the Greyhound sale.

The company explained that the initial proceeds of $140m from the Greyhound sale would be retained to close out legacy liabilities and related net costs. It noted that the balance of property proceeds and deferred consideration would result in the group realising around $178m in net value “over time”.

FirstGroup added that it expects to record a gain on disposal in accounts for the current year, stating that further profits on the sales of the properties would be realised in future.

Jeffries said: “A sale of challenging Greyhound has been in the pipeline for some time, so completion today is strategically important.

"An overall net $19m liability from the disposal (after future proposed property disposals) is offset by retained proceeds from the recent First Student and Transit sale.

"Future property sales may delay any returns to shareholders.”

Shares in FirstGroup closed down 0.7p at 90.6p.