First Manchester

[Nicholas]

RE: First Manchester
Oh, here's the article in full:

FirstGroup is seeking buyers for seven different operations in England, according to a list obtained by Passenger Transport.

In the North West, the group is inviting bids for its operations in Wigan, Chester and Birkenhead, while in the Midlands the group’s bases in Northampton, Redditch and Kidderminster are for sale.

Also being lined up for disposal is an as yet unspecified part of its 163-vehicle operation in Somerset.

All of the ‘for sale’ operations are in provincial England, although industry rumours suggest that businesses in Scotland, Wales and London could also be sold as part of FirstGroup’s pledge to its shareholders to raise £100m through disposals of “non core” UK bus operations. The group has raised £16.8m through the sales of its operations in Northumberland Park, London, and North Devon (PT028), and chief executive Tim O’Toole is confident that the remaining £83m can be raised by the end of this financial year.

The sale of the seven operations on the list obtained by Passenger Transport is unlikely to raise £83m in the current climate. FirstGroup’s recent disposals in London and Devon raised £107,692 per bus and £93,333 per bus respectively. Even if the higher figure was applied to the 495-vehicle fleet that FirstGroup is offering for sale, it would only raise £53m – leaving the group £30m short of its target.

“Where are the buyers for these operations?” asked one industry expert this week. “It’s not a good time to be selling bus companies unless they are gold-plated.”

The inclusion on the list of Wigan, part of the group’s First Manchester operation, has raised eyebrows. The town is considered to be strong bus territory for a competent operator.

Less surprising is the decision to sell Chester, where profits have been eroded by competition with Arriva. However, it is unlikely that First will be unable to sell the business to it’s local rival without the competition authorities intervening. Last year, the Competition Commission raised concerns about the relationship between the two companies in the The Wirral and Chester (PT019). Most of the latter operation is a relatively recent addition to the group’s portfolio, having been purchased from its local authority owners in 2007.

Paul Matthews, the former chief executive of RATP Dev UK, is understood to be advising FirstGroup on its disposal programme. Along with RATP, Go Ahead Group and AIM-listed Rotala are expected to take a close look at First’s ‘for sale’ list. Go Ahead has bought three bus companies in the East of England this year while fast-expanding Rotala has previously bought bus businesses in the West Midlands, North West and South West.

A FirstGroup spokesperson commented: “The vast majority of our UK Bus division generates good returns with opportunities to improve further. As previously announced, however, there is scope to reposition our portfolio to concentrate on those markets that offer the greatest long term potential.

“We are developing opportunities for a number of disposals within our UK Bus division and the unsubstantiated information given to Passenger Transport does not comprise the entire sum of those disposals. We have always been very clear that from the outset that our strategy is to bring those businesses to the market in select tranches to ensure stability for our employees and operations. Given the breach of confidentiality that has taken place it demonstrates that this is the correct approach.

“At this point, we are not disclosing any more details about our plans for commercial reasons and to ensure that we are able to fully consult with any employees and other stakeholders that may be affected.”