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FirstGroup fends off activist attack

Shareholders in the transport operator voted against Coast Capital's proposals to replace six board members
FirstGroup fends off activist attack

FirstGroup (FGP) has avoided an overhaul of its current board of directors after shareholders voted against proposals put forward by Coast Capital, the transport group’s largest shareholder, to have six members of its board removed and replaced with the activist’s own candidates. On average, shareholders excluding Coast Capital voted more than four to one against the activist’s resolutions.

IC TIP: Hold at 96p

Despite this defeat, chairman Wolfhart Hauser will step down from his role after the annual meeting on 25 July. Senior independent director David Robbie will become interim chairman as the board seeks a permanent replacement. Around 29 per cent of shareholders voted in favour of having Mr Hauser removed from his post. Meanwhile, around three-quarters of shareholders voted for chief executive Matthew Gregory to keep his place.

Liberum analyst Gerald Khoo called it a “relatively benign out-turn” from the meeting, but added that management will have to execute a difficult portfolio rationalisation against a backdrop of significant pressure, as Coast Capital is showing no sign of relenting in its campaign. Coast Capital called the resignation of Mr Hauser a “constructive first step in the direction of achieving full value for shareholders”.

Ahead of the meeting, Coast Capital launched a final attack claiming that Mr Hauser and Mr Gregory had been giving mixed messages relating to future plans for the transport group. The activist said it had been informed the two directors had told some shareholders that “everything is for sale at the right price”, and that they were in discussions to sell the First Student bus business to private equity investors. This went against FirstGroup’s stated intention on 30 May to implement a “portfolio rationalisation” via the planned sales of the Greyhound coach business and UK bus, while focusing on “core” North American operations such as First Student. Coast Capital said it has sought legal counsel to investigate these statements and consequences.

A spokesperson for FirstGroup called the allegations a "desperate and spurious” and a “further ploy designed to discredit and destabilise the board and the company”. FirstGroup maintains that these claims are “baseless” and has asked Coast Capital to provide proof, with no result at the time of writing. The spokesperson maintained that conflicting accounts of the company’s strategy are not circulating among shareholders, and stuck by the strategy as set out in May.