LONDON, UK: FirstGroup plc announced the sale of Greyhound Lines Inc. to a wholly-owned subsidiary of FlixMobility GmbH, 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.