European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>FirstGroup's Board rejected a 118p + up to 45.6p contingent payment. PUSU deadline is 23 June, and can be extended with the consent of the Panel. </li>
<li>Infrastructure funds have put their sight on UK buses due to predictable revenues and a friendlier regulatory framework. The Board of FirstGroup is aware and should seek higher value.</li>
<li>I Square could bid a more palatable 166.8p/share: 144p/share (8.2x EV/Fwd EBIT, average of StageCoach and Go-Ahead transactions), plus 22.8p/share (50% discount to the maximum contingent payout). Long.</li>
</ul>


FirstGroup's Board rejected a 118p + up to 45.6p contingent payment. PUSU deadline is 23 June, and can be extended with the consent of the Panel. 
Infrastructure funds have put their sight on UK buses due to predictable revenues and a friendlier regulatory framework. The Board of FirstGroup is aware and should seek higher value.
I Square could bid a more palatable 166.8p/share: 144p/share (8.2x EV/Fwd EBIT, average of StageCoach and Go-Ahead transactions), plus 22.8p/share (50% discount to the maximum contingent payout). Long.


I Squared/FirstGroup: Looming PUSU Deadline

<ul>
<li>Although Gerrard Bidco offers a 1500p package (likely settlement on 2 September), the shares are trading c. 6% above in the expectation of a counteroffer.</li>
<li>At 7.7x EV/Fwd EBIT, consideration is below the 8.6x EV/Fwd EBIT offered by DWS for struggling rival Stagecoach. FirstGroup is trading at 11.9x EV/Fwd EBIT after rebuffing I Squared Capital Advisors' approach.</li>
<li>I do not believe shareholders will accept the current offer. Kelsian could counterbid up to 1715p (Stagecoach takeout multiple), 14% above current offer (c. 7.3% spread, 42% estimated annual return).</li>
</ul>


Although Gerrard Bidco offers a 1500p package (likely settlement on 2 September), the shares are trading c. 6% above in the expectation of a counteroffer.
At 7.7x EV/Fwd EBIT, consideration is below the 8.6x EV/Fwd EBIT offered by DWS for struggling rival Stagecoach. FirstGroup is trading at 11.9x EV/Fwd EBIT after rebuffing I Squared Capital Advisors' approach.
I do not believe shareholders will accept the current offer. Kelsian could counterbid up to 1715p (Stagecoach takeout multiple), 14% above current offer (c. 7.3% spread, 42% estimated annual return).


Kinetic & Globalvia/Go-Ahead: Recommended Offer

<ul>
<li>Stagecoach has agreed to a <strong>105p cash offer</strong> from DWS (37% premium, 14.7x EV/Fwd EBIT). The board has withdrawn the prior recommendation for an all-share merger with National Express.</li>
<li>National Express could respond by increasing its offer in line with DWS's, but that would imply giving away c. 50% of the combined company, which I think unlikely.</li>
<li>The offer is not incredibly generous, but there are risks (soaring fuel prices, inflation, etc.). Gross spread is nil and the offer is likely to close.</li>
</ul>


Stagecoach has agreed to a 105p cash offer from DWS (37% premium, 14.7x EV/Fwd EBIT). The board has withdrawn the prior recommendation for an all-share merger with National Express.
National Express could respond by increasing its offer in line with DWS's, but that would imply giving away c. 50% of the combined company, which I think unlikely.
The offer is not incredibly generous, but there are risks (soaring fuel prices, inflation, etc.). Gross spread is nil and the offer is likely to close.


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<p><strong>Corrigenda</strong>: There is an error in this insight. Please note the correction.</p>
<p><strong>Correction</strong>: in the 3rd bullet in Executive Summary:<br>Instead of “Short 1 SGE LN, long 0.36 NEX LN” should read “Long 1 SGE LN, short 0.36 NEX LN”</p>
</div>
</div>
<ul>
<li>The deal is defensive and centered in the UK, with US, Spain and Morocco as other major markets. It seeks scale and the synergies look achievable.</li>
<li>The consideration represents a 18% premium, 12.7 EV/Fwd EBITDA and 19.5x Fwd P/E.</li>
</ul>
<div>
<ul>
<li>Stagecoach shareholders will likely approve the integration. <strong>Short 1 SGE LN, long 0.36 NEX LN</strong>. Patience may be needed to set up a large position.</li>
</ul>
<p></p>
</div>



Corrigenda: There is an error in this insight. Please note the correction.
Correction: in the 3rd bullet in Executive Summary: Instead of “Short 1 SGE LN, long 0.36 NEX LN” should read “Long 1 SGE LN, short 0.36 NEX LN”



The deal is defensive and centered in the UK, with US, Spain and Morocco as other major markets. It seeks scale and the synergies look achievable.
The consideration represents a 18% premium, 12.7 EV/Fwd EBITDA and 19.5x Fwd P/E.



Stagecoach shareholders will likely approve the integration. Short 1 SGE LN, long 0.36 NEX LN. Patience may be needed to set up a large position.




National Express/Stagecoach: All-Stock Merger

US/Europe Event-Driven Analyst

John DeMasi

<p><a href="https://www.smartkarma.com/entities/firstgroup-plc" target="_blank" data-smartkarma-citation="entities:21936:1" rel="noopener">Firstgroup PLC (FGP LN)</a> is a UK-based transit provider that has been in the sights of activist investors on and off for a number of years.</p>
<p>In this report I look at the history of activist tilts towards FGP LN including the latest attempt by Coast Capital, as well as delve into business performance and share price valuation, and see what it all means for event-driven investors.</p>

Firstgroup PLC (FGP LN) is a UK-based transit provider that has been in the sights of activist investors on and off for a number of years.
In this report I look at the history of activist tilts towards FGP LN including the latest attempt by Coast Capital, as well as delve into business performance and share price valuation, and see what it all means for event-driven investors.

FirstGroup Plc – Barbarians at the Bus Stop

United Kingdom

Stagecoach Group plc is an international transport group, with operations in the UK, United States and Canada. The Company operates bus, coach, train, and tram services.

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Stagecoach (SGC LN)

I Squared/FirstGroup: Looming PUSU Deadline

Three out of four major London-listed bus operators have attracted private equity interest in recent months. Infrastructure funds seek the stable...

Jesus Rodriguez Aguilar

Kinetic & Globalvia/Go-Ahead: Recommended Offer

The Board recommends Kinetic and Globalvia offer, but the market believes Go-Ahead is worth more. The shares are trading 6% above the consideration...

Jesus Rodriguez Aguilar

DWS Gatecrashes NEX Offer for Stagecoach

Stagecoach has agreed to an offer by DWS Infrastructure, and has therefore withdrawn its previous recommendation to the offer by National Express,...

Jesus Rodriguez Aguilar

National Express/Stagecoach: All-Stock Merger

At the closing 15 Dec. prices, the spread was 6%. This may be explained by the expected close review by the CMA and the anticipated twelve months...

Jesus Rodriguez Aguilar

FirstGroup Plc – Barbarians at the Bus Stop

Firstgroup PLC (FGP LN) is a UK-based transit provider that has been in the sights of activist investors on and off for a number of years. In this...

John DeMasi

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