Greyhound Bus Operator Attracts Private Equity Interest

(Bloomberg) -- FirstGroup Plc, the operator of Greyhound buses and British trains, is attracting interest from buyout firms including CVC Capital Partners as it conducts a review of the business, people familiar with the matter said.

The buyout firm has not made a formal bid and deliberations are in early stages, the people said, asking not to be identified as the details aren’t public. FirstGroup, which has a market value of 1.2 billion pounds ($1.5 billion), this year rejected proposals from Apollo Global Management LLC, saying in May that they “fundamentally undervalued” the business. Potential bidders may make offers for part or all of the business, the people said.

FirstGroup shares rose 0.7 percent at 9:46 a.m. on Friday after earlier jumping as much as 7.7 percent, the biggest intraday gain since June.

FirstGroup’s pension deficit might be an obstacle to a deal, as could the need for U.K. government approval for a change in control of rail franchises, according to Liberum Capital Ltd. If these hurdles can be overcome, it would be difficult for FirstGroup to turn away interest again given its “relatively lackluster” performance, Liberum analyst Gerald Khoo wrote in a note.

Representatives for FirstGroup and CVC declined to comment. Canadian activist fund West Face Capital acquired a stake in FirstGroup last year and now holds a 2 percent position in the company, according to data compiled by Bloomberg.

FirstGroup Chief Executive Officer Tim O’Toole resigned in May after the Aberdeen, Scotland-based company reported an operating loss for the year ended March 31. Wolfhart Hauser, who was appointed executive chairman until a new CEO is found, said at the time the company had started a review of the business model and its long-distance U.S. bus service Greyhound.

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