U.K. transport firm FirstGroup Plc agreed to sell the biggest operator of America’s yellow school buses as part of a $4.6 billion deal, bowing to investor pressure to retreat from a global expansion.

NEW YORK, NY – JANUARY 15: A school buses idles in front of a school in Manhattan’s East Village on January 15, 2013 in New York City. Drivers of the city’s school buses are set to go on strike tomorrow after negotiations with Mayor Michael Bloomberg failed to reach an agreement; over 150,000 children will need to find an alternate method of transportation to school. (Photo by Mario Tama/Getty Images)

The stock surged as much as 19 percent after Stockholm-based investment firm EQT Infrastructure agreed to purchase First Student, which serves 1,000 school districts, and First Transit, an operator of bus services across more than 300 locations with its headquarters in Cincinnati. Iconic long-distance brand Greyhound isn’t included but remains for sale, FirstGroup said Friday.

The transaction marks a breakup of FirstGroup, whose international strategy prompted a pressure campaign that lasted more than two years and cost its chairman his job. The company decided before the pandemic to sell the U.S. businesses, after activists including top shareholder Coast Capital LP argued the assets would be worth more sold off. While the bulk of proceeds will be used to fund its U.K. operations and pay down debt, some 365 million pounds ($506 million) will go to investors.

The deal’s value is above previous estimates of about $4 billion.

The FirstGroup transaction is the largest this year for EQT, trumping the $4.2 billion fundraising for portfolio company IVC Evidensia that the firm joined in February, data compiled by Bloomberg show. EQT has been involved in at least $34.5 billion of deals over the past 12 months.


FirstGroup chief executive officer Matthew Gregory said the sale recognizes the “full strategic value” of First Student and First Transit while focusing the company on its U.K. bus and rail operations.

The stock traded 8.6% higher as of 11:34 a.m. in London, valuing Aberdeen, Scotland-based FirstGroup at 1.13 billion pounds. The company said adjusted operating profit for fiscal 2021 should be ahead of its previous expectations.

While not included in the transaction, Greyhound remains non-core, according to FirstGroup, which said it will continue to pursue all exit options for the business. After it’s sold, the company will be left with U.K. rail assets including the long-distance Great Western, West Coast and East Coast lines, as well as municipal bus services in cities such as Manchester and Glasgow.


Crosby Cook, partner and investment adviser at EQT Partners, said in an interview that the U.S. purchase will help offset risk in other sectors, with the need for “in-person schooling” undiminished by the coronavirus crisis. Contracts are long, averaging more than 10 years, and 60% of school transport is still provided by local authorities, so there’s scope for expansion.

The deal has been under discussion since FirstGroup first flagged the assets as available in 2019, Cook said, adding that the U.K. company wanted to sell First Student and First Transit together, though the latter is also attractive for its federally regulated para-public operations.

Crosby said that as an infrastructure fund EQT has a longer time horizon for developing assets before selling them than a typical private equity model, and plans to invest in electric buses and technological enhancements such as providing tablets to drivers to help refine pickup routes.

EQT Growth

EQT has become one of Europe’s largest PE firms with 52 billion euros ($63 billion) of assets under management across 17 funds. Key to that growth has been the development of its infrastructure funds, which have made large investments in telecommunications, fiber and data centers such as EdgeConneX.

EQT has also been exploring a takeover of Dutch phone company Royal KPN NV, Bloomberg News reported last year.

The company said last month its infrastructure V fund would reach a hard cap of 15 billion euros this year, citing “strong support from both new and existing investors.” With this latest transaction, the fund will be 20-25% invested.