Yellow School-Bus Owner Thwarts Activists as Investors Back Sale

FirstGroup Plc secured investor backing for the $4.6 billion sale of its U.S. school bus business, fending off a bid to block the deal by activist shareholders who said the price was too low.

The sale to Swedish investment firm EQT Infrastructure was approved by 61% of votes at a virtual meeting Thursday, Aberdeen, Scotland-based FirstGroup said in a statement.

FirstGroup’s top investor, Coast Capital Management LP, led the opposition to the transaction with EQT. While the firm, with a near 14% stake, had sought the breakup, it called for the terms to be substantially improved. Some smaller shareholders backed the call for the disposal to be revisited.

In a statement after the vote FirstGroup Chairman David Martin defended the deal, saying it returned value to investors, addressed long-standing liabilities and made a substantial contribution to company pension plans. The company had earlier described the auction as robust and competitive.

Shares of FirstGroup were little changed at 3 p.m. in London, after trading higher prior to result. The stock is priced at about the level it was prior to the sale announcement, prompting Coast founding partner James Rasteh to say in an email that the market “is not positively greeting the sale of crown-jewel assets,” while branding the transaction as ill-conceived.

EQT, based in Stockholm, said it plans to make significant investments in the U.S. bus business, including the electrification of vehicles and digital upgrades.

Yellow Buses

FirstGroup agreed in April to sell First Student, the biggest operator of America’s iconic yellow school buses, serving 1,000 districts, in a move marking its retreat to the U.K. after years of investor pressure to realize the value of its global assets.

EQT is also buying First Transit, an operator of municipal buses in more than 300 locations. FirstGroup’s Greyhound division, the iconic operator of cross-country buses, remains for sale.

Coast responded to the sale announcement by saying the disposal price failed to match the multiples of comparable deals, and that FirstGroup had refused to engage with alternative buyers that it had brought forward.

Its stance was publicly backed by No. 2 investor Schroders, with about 12% of the stock. A spokesman declined to comment Thursday, referring Bloomberg to earlier remarks in which it said it would vote against the transaction as undervaluing the bus businesses.

FirstGroup defended the sale as the result of a process that was run by three of the world’s leading investment banks, spanned more than a year and saw the company engage with more than 40 potential buyers.

Proxy advisers were divided in their views, with ISS, IVIS and PIRC urging shareholders to back the sale while Glass Lewis recommended that they vote against it, citing “an inadequate valuation and poor transaction timing.”

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