On the go: Shareholders of transportation company FirstGroup have approved the sale of two subsidiaries, with the profits being used in part to fund a black hole in its defined benefit schemes.
In a market update on Thursday, FirstGroup stated that the sale of the company’s First Student and First Transit subsidiaries to private equity company EQT Infrastructure received the green light from 61.3 per cent of voters in a poll.
As reported by Pensions Expert in April, the company’s pension schemes stand to benefit from the £3.3bn sale of the assets, with £2.1bn of the proceeds going towards addressing “long-standing liabilities”, while roughly £1.3bn is to go towards reducing indebtedness and derisking liabilities, such as the group’s legacy pension funds in North America.
The UK Bus and Group pension schemes will receive £336m, “enabling [a] move to a low-dependency funding position”.
The FirstGroup board entered into a memorandum of understanding with the trustee of the First UK Bus Pension Scheme and the FirstGroup Pension Scheme, as part of which £220m of the £336m has been allocated to the former.
However, with only a small portion of funds allocated to shareholder dividends — the existing plan would see these receive just 10 per cent of the proceeds — Coast Capital, FirstGroup’s largest investor, questioned the deal, as reported earlier this month.
A Coast Capital spokesperson said at the time: “Coast confirms that it reserves its rights in respect of this proposed transaction. But any transaction, were this to command the support of Coast Capital, would need properly to respect and protect the legitimate interests of all FirstGroup’s stakeholders, including its investors, staff and pensioners.”
However, following the positive support of FirstGroup shareholders, the company’s board now expects the sale to be completed in the second half of 2021.
Full details of a proposed return of value to shareholders will be made available following the sale, the board stated, adding that if necessary a general meeting will be convened to seek shareholder approval of the proposed return of value.
