Greyhound Bus Lines Will Have a New European Owner
Greyhound Bus Lines Will Have a New European Owner
(Bloomberg) -- Long-distance bus operator Greyhound may be a U.S. icon, but it’s staying in European hands after British owner FirstGroup Plc agreed a sale to Germany’s FlixMobility GmbH.
After a years-long effort to dispose of Greyhound, FirstGroup will unload the business for $172 million, according to a statement Thursday.
FlixMobility faces a challenge in transforming perceptions of intercity bus trips in the U.S., where many Americans prefer to use a car or plane for long-distance travel. The sector has a reputation for grueling rides and stinking toilets, whereas the European equivalent has taken on an eco-friendly, sharing-economy vibe, with perks such as free Wifi and electrical outlets.
FlixMobility has been building a low-cost network in Europe for almost a decade and launched the FlixBus brand in the U.S. in 2018, linking California colleges with destinations like Las Vegas and Disneyland before expanding to New York and Texas. The Munich-based firm raised $650 million in June from investors who include BlackRock Inc.
The company said that Greyhound, which carries almost 19 million people annually in North America, will gain ground as economies recover from the coronavirus crisis and more people avoid the car to reduce carbon emissions. Flixbus previously ranked behind both Greyhound and Megabus in the region.
“A compelling offering will draw significantly more travelers away from private cars to shared intercity bus mobility,” said André Schwämmlein, FlixMobility’s co-founder and chief executive officer. “Together, FlixBus and Greyhound will be better able to meet this increased demand.”
FlixBus operates an asset-light model in Europe based around partnerships, though a spokeswoman said it’s too early to say whether it will seek to transition to a similar approach in North America.
Shares of Aberdeen, Scotland-based FirstGroup rose as much as 3.5 and traded 1.7% higher as of 10:32 a.m. in London. The company said in July it was stepping up the search for a buyer for Greyhound after completing the $4.6 billion sale of its other U.S. assets, chiefly a yellow school bus business.
The purchase price comprises $140 million up front, with a further $32 million paid over 18 months, the U.K. firm said.
Jefferies International analyst Becky Lane said the deal is “strategically important” for FirstGroup, given the drawn-out nature of the disposal, though the planned sale over five years of retained Greyhound properties worth 176 million pounds ($243 million) may delay shareholder returns.
FirstGroup acquired Greyhound via the takeover of U.S. bus group Laidlaw in 2007 and introduced its own upgrades including Wifi, along with seat booking and dynamic pricing based on levels of demand.
Greyhound has been providing transport services for more than 100 years and has 1,300 vehicles. It posted an adjusted operating profit of $1.8 million on revenue of $423 million in the year through March 27.
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