FIRSTGROUP PLC
SALE OF GREYHOUND LINES, INC.
FirstGroup plc ('FirstGroup' or the 'Group') announces the sale
of Greyhound Lines, Inc. to a wholly-owned subsidiary of
FlixMobility GmbH ('FlixMobility') (the 'Transaction'), completing
its stated strategy to focus on its leading UK public transport
businesses.
- The Transaction results in cash consideration to the Group of
$172m, comprising $140m paid initially, with $32m in unconditional deferred consideration paid
in instalments over eighteen months
- Greyhound properties with an estimated net market value of
c.$176m will be retained by
FirstGroup; they will initially be leased back to Greyhound at
market rates but are expected to be sold over the next three to
five years
- FirstGroup also retains certain legacy Greyhound net
liabilities, including pension, self-insurance, and finance leases
settled at closing, which in total were valued at $320m as at 27 March
2021, as well as grant receivables, buyout premia and other
items estimated at a net cost of c.$47m, against which the Group had retained
$197m of proceeds from the sale of
First Student and First Transit earlier in the year
- The $140m of Greyhound initial
cash proceeds will be retained by the Group to support the
close-out of these legacy liabilities and related net costs, with
the balance of the property proceeds and deferred consideration
resulting in c.$178m (c.£128m) in net
value for the Group being realised over time
- The Transaction is not subject to any closing conditions and
will complete today
Commenting, David Martin,
FirstGroup Executive Chairman 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.
"I want to thank the management and employees of Greyhound, who
have remained steadfastly dedicated to providing the best possible
service for their customers despite the challenges of the pandemic.
I am confident their commitment to high standards of service for
customers will be sustained and the business will continue to
strengthen and develop in future under its new ownership."
Jochen Engert, Founder and
Chief Executive Officer of FlixMobility, said:
"The continuous expansion of our network through partnerships and
acquisitions has always been an integral part of our growth
strategy to build our global presence. The acquisition of Greyhound
is a major step forward and strengthens FlixBus´ leading position
in the US. The FlixBus and Greyhound teams share a common vision to
make smart, affordable and sustainable mobility accessible to
all."
Background to and reasons for the Transaction
FirstGroup has previously set out its objective to rationalise the
Group’s portfolio of businesses in light of the limited synergies
between its UK and North American divisions, and today's
Transaction follows the sale of the Group's other North American
businesses, First Student and First Transit, to EQT Infrastructure
in July 2021. The Transaction
provides clarity for Greyhound’s customers, employees and
stakeholders and we believe that its new owners are well placed to
support the continued development of Greyhound going forward.
Effects on FirstGroup
In the near term, FirstGroup intends to use the initial cash
proceeds of the Transaction together with the remaining cash set
aside from the sale of First Student and First Transit to
accelerate the de-risking of the Greyhound self-insurance
liabilities and settle the finance leases, with discharge of the
remaining pension liabilities to follow in due course. The
$32m in deferred unconditional
consideration, property value of $176m and CARES/ARP grant collections are
expected to be realised over time, resulting in c.$178m (c.£128m) in net value for the Group, which
may be considered for potential supplementary returns to
shareholders or for other opportunities in future.
The Group expects to record a gain on disposal in the current
year accounts as a result of today's Transaction, with further
profits on sales of the property portfolio to be realised in
future.
Following today's announcement and with certain First Bus
capital expenditure payments now falling after the period end and
better than expected working capital flows, the Group estimates
that adjusted net debt1 at the end of the current
financial year will be c.£80-90m
lower than previously expected, in the range of £10-20m.
Trading in the Group's continuing businesses year to date has
been in line and there is no change to management's expectations
for the current financial year as outlined in the full year results
announcement on 27 July 2021.
FirstGroup intends to publish results for the first half of the
financial year on Thursday 9 December
2021.
Information regarding Greyhound
Greyhound is the only nationwide operator of scheduled intercity
coach services across the United
States, as well as operations into Canada and Mexico. Its iconic brand has been a mainstay
of the North American transportation landscape for more than a
hundred years. Greyhound’s fleet of 1,300 vehicles and 2,400
employees provide services connecting 1,750 destinations across
North America. For the 52 weeks to
27 March 2021, Greyhound Lines, Inc.
reported revenue of $422.6m
(£323.0m), EBITDA of $37.4m (£27.3m)
and an adjusted operating profit of $1.8m (£1.3m)2. The gross assets the
subject of the Transaction as at 27 March
2021 were $193.8m
(£141.5m).
Information regarding FlixMobility
FlixMobility is mobility provider, offering new alternatives for
convenient, affordable and environmentally friendly travel via the
FlixBus and FlixTrain brands. With a unique approach and innovative
technology, the company has quickly established Europe's largest long-distance bus network and
launched the first green long-distance trains in 2018 as well as a
pilot project for all-electric buses in Germany, the US and France. Since 2013, FlixMobility has changed
the way hundreds of millions of people have travelled throughout
Europe and created tens of
thousands of new jobs in the mobility industry. In 2018,
FlixMobility launched FlixBus USA
to bring this new travel alternative to the United States.
Further Transaction details
Greyhound assets and liabilities inside the Transaction
perimeter
FirstGroup has reached agreement with Neptune Holding Inc. (the
'Buyer'), a corporation 100% controlled by FlixMobility, to sell
Greyhound Lines, Inc., the US Greyhound operating business
(including its vehicle fleet, trademarks, and certain other assets
and liabilities) for an enterprise value on a debt-free / cash-free
basis of c.$46m plus unconditional
deferred consideration of $32m with
an interest rate of 5% per annum. A further $1.5m may also become payable contingent on
specific agreement of a particular property lease.
Greyhound has now received both tranches of cash grants under
the US Department of the Treasury’s Coronavirus Economic Relief for
Transportation Services ('CERTS') scheme, totalling $108m, or c.$7m
higher than initially anticipated, which will be retained by
Greyhound Lines Inc. and spent on its operations in accordance with
the terms of the grant. Recognising its resulting cash balance and
c.$14m in debt and debt-like items
being assumed by the Buyer, the cash proceeds received by the Group
from the Buyer at closing as a result of the Transaction is
$140m, with the $32m in unconditional deferred consideration (to
be received in regular instalments from the Buyer over the next 18
months or sooner) resulting in consideration payable of
$172m.
Greyhound property assets and legacy liabilities outside the
Transaction perimeter
Greyhound-related property holdings in the US (the 'Retained
Properties') with an aggregate estimated net market value of
c.$176m are not part of the
Transaction with the Buyer and will be retained by FirstGroup. The
Buyer has entered into lease agreements to use the Retained
Properties as part of Greyhound’s future operations at market
rental levels. The majority of these are subject to a three-year
lease term, with the remainder subject to a six-month initial term
followed by six-month rolling terms. FirstGroup intends to monetise
all of the Retained Properties over time to further optimise net
proceeds.
As previously indicated, Greyhound also remains eligible to
receive further funding awards from other US federal schemes such
as the CARES Act and the American Rescue Plan ('ARP'), and, to the
extent that further recoveries are made under these schemes which
relate to losses incurred while Greyhound was under the Group's
ownership during the pandemic, the Buyer will pay equivalent
amounts to FirstGroup.
In addition to the Retained Properties, FirstGroup will also
retain certain other Greyhound liabilities, including Greyhound’s
self-insurance reserve liabilities up to the date of closing
(valued at $151m as at 27 March 2021), the Greyhound defined benefit
pensions schemes (valued at $144m as
at 27 March 2021), finance leases
(valued at $25m as at 27 March 2021 that have been settled on closing)
and certain environmental and other liabilities and costs.
Greyhound is currently in the process of completing the closure of
its activities in Canada and these
do not form part of the Transaction; as such the Group retains all
the assets and liabilities relating to this business (including its
defined benefit pension scheme, legacy insurance liabilities and
real estate). As noted at the full year results, $197m of the First Student and First Transit sale
proceeds was set aside to de-risk these liabilities, and since then
the Group has made an initial payment of c.$102m into the Greyhound pension schemes in the
US and Canada to begin that
process.
FirstGroup has a strong track record of actively managing
Greyhound’s property holdings for value, such as the sale of three
Greyhound properties for gross proceeds of $137m and a profit on sale of c.$100m announced in December 2020. FirstGroup has realised aggregate
proceeds of Greyhound-related property of $400m over the last 10 years through 30 property
transactions of $1m or more in
value.
Contacts at FirstGroup:
Faisal Tabbah, Head of Investor
Relations
Stuart Butchers, Group Head of Communications
Tel: +44 (0) 20 7725 3354
corporate.comms@firstgroup.co.uk
Contacts at Brunswick PR:
Andrew Porter / Simone Selzer, Tel: +44 (0) 20 7404 5959
Contacts at Goldman Sachs International:
Sole Financial Advisor and Joint Corporate Broker
Eduard van Wyk and Bertie Whitehead, Tel: +44 (0) 20 7774 1000
Further notes
|
$m |
Enterprise value of
Greyhound Lines, Inc., on debt- and cash-free basis payable at
closing |
46 |
Unconditional deferred
consideration for Greyhound Lines, Inc. payable over 18 months |
32 |
Enterprise value of
Greyhound Lines, Inc. on debt- and cash-free
basis3 |
78 |
|
|
Estimated net
position to be realised over time: |
|
Enterprise value of
Greyhound Lines, Inc., on debt- and cash-free basis payable at
closing (from above) |
46 |
Cash on Greyhound Lines.
Inc. balance sheet |
108 |
Debt and debt-like items
on balance sheet transferred to Buyer |
(14) |
Net cash proceeds
payable at closing for Greyhound Lines, Inc. |
140 |
|
|
Unconditional deferred
consideration for Greyhound Lines, Inc. payable over 18 months
(from above) |
32 |
Net cash proceeds
payable for Greyhound Lines, Inc.3 |
172 |
|
|
Estimated market value
of Retained Properties, to be realised over three-to-five
years |
176 |
Cash proceeds plus
estimated realisable market value of Retained
Properties3 |
348 |
|
|
Total net legacy
liabilities initially retained as at 27 March 2021: |
|
- Self-insurance provision |
(151) |
|
- Pension deficit |
(144) |
|
- Finance leases settled at
closing |
(25) |
|
- Other estimated net liabilities
(CARES/ARP receivables, Canada, buyout premia/deal costs,
environmental, etc) |
(47) |
|
- Proceeds from sale of First
Student and First Transit set aside to manage Greyhound
liabilities |
197 |
|
Estimated net cost to
discharge retained net liabilities |
(170) |
|
|
Estimated net
position to be realised over time, following property sales,
discharge of legacy liabilities3 etc |
178 |
|
|
|
|
1 'Adjusted net
debt' excludes First Rail ring-fenced cash and IFRS 16 lease
liabilities from net debt, as defined in the FY21 results.
2 ‘Adjusted
operating profit' is stated before gain on disposal of properties,
strategy costs, self-insurance provision charge and certain other
items. 'EBITDA' is earnings before interest, tax, depreciation and
amortisation, calculated as adjusted operating profit less capital
grant amortisation plus depreciation.
3 Excludes a
further $1.5m in consideration which
may become payable contingent on specific agreement of a particular
property lease.
All '$' or 'USD' amounts are
United States dollars.
Goldman Sachs International is
authorised by the Prudential Regulation Authority and regulated by
the Financial Conduct Authority and the Prudential Regulation
Authority. Goldman Sachs International is acting exclusively for
FirstGroup and no one else in connection with the Transaction and
will not regard any other person (whether or not a recipient of
this announcement) as a client in relation to the Transaction and
will not be responsible to anyone other than FirstGroup for
providing the protections afforded to Goldman Sachs International's
clients nor for giving advice in relation to the Transaction or any
other arrangement referred to in this announcement.
FirstGroup plc (LSE: FGP.L) is a
leading private sector provider of public transport services. With
£4.3 billion in revenue and around 30,000 employees, our UK
divisions transported nearly 700,000 passengers a day in the 52
weeks to 27 March 2021. First Bus is
the second largest regional bus operator in the UK, serving
two-thirds of the UK’s 15 largest conurbations with a fleet of
c.5,000 buses. First Rail is the UK’s largest rail operator, with
many years of experience running long-distance, commuter, regional
and sleeper rail services. We operate a fleet of c.3,750 rail
vehicles on four contracted operations (Avanti, GWR, SWR, TPE) and
two open access routes (Hull Trains and Lumo, our new East Coast
service launching later in 2021). We create solutions that reduce
complexity, making travel smoother and life easier. Our businesses
are at the heart of our communities and the essential services we
provide are critical to delivering wider economic, social and
environmental goals. We are formally committed to operating a
zero-emission First Bus fleet by 2035 and to cease purchasing
further diesel buses after 2022; and First Rail will help support
the UK Government’s goal to remove all diesel-only trains from
service by 2040. Visit our website at www.firstgroupplc.com and
follow us @firstgroupplc on Twitter.
Legal Entity Identifier (LEI):
549300DEJZCPWA4HKM93. Classification as per DTR 6 Annex 1R: 2.2.
This announcement contains inside information. The person
responsible for arranging the release of this announcement on
behalf of FirstGroup is David
Isenegger, Group General Counsel and Company Secretary.