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UK transport operator FirstGroup reportedly attracts interest from private equity firms

Liberum said such interest in FirstGroup "seems inevitable" in the wake of prior interest from Apollo private equity funds
One of the potential bidders is CVC Capital Partners

UK train and bus operator FirstGroup PLC (LON:FGP) has reportedly attracted the interest of private equity firms looking to buy the company

One of the potential bidders is CVC Capital Partners, which in the early stages of deliberations and is yet to make a formal offer, Bloomberg reported, citing “people familiar with the matter”.

The interested parties may make bids for part or all of the business, the sources were reported as saying.

FirstGroup, which owns Great Western Railway and South Western Railway in the UK and the Greyhound coach business in the US, declined to comment on the report.

The news comes after FirstGroup turned down proposals from Apollo Global Management LLC in May, saying they “fundamentally undervalued” the business.

READ: FirstGroup says considering all options to boost its value, having rejected two bids from earlier this year

Analysts at Liberum said: “Such interest seems inevitable in the wake of prior interest from Apollo private equity funds and hints of a more rigorous review of the business by management.”

They added: “We see an opportunity to bridge the gap between FirstGroup’s market-leading positions and its sub-par financial performance. Obstacles remain, notably the pension deficit and UK rail franchises, but none are insurmountable.”

Liberum maintained a ‘buy’ rating on the stock and a target price of 110p.

FirstGroup said in May that it had launched a review of the business as it reported an operating loss for the year ended March 31 and announced the resignation of chief executive Tim O’Toole.

READ: FirstGroup drops as it replaces its chief executive after profits fall; puts Greyhound bus unit under review

Shares in the company have fallen 13% this year amid investor concerns about tough competition for Greyhound and underperformance rail businesses in the UK drag on its performance.

In morning trading, shares edged up 0.2% to 96p. 

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