Welcome!

News Feed Item

Sandell Provides Update on Its Engagement With FirstGroup

LONDON, January 15, 2014 /PRNewswire/ --

Urges FirstGroup to reconsider its premature rejection of the Sandell Plan

Publishes White Paper detailing the operational and financial benefits of the Sandell Plan

Believes there is strong shareholder support for its ideas

Sandell Asset Management Corp. ("Sandell"), a significant investor in FirstGroup plc. ("FirstGroup" or the "Company") with an interest of approximately 3.1% of the Company, has today written to the Board of the Company.

On 11 December 2013, Sandell Asset Management welcomed the appointment of Mr. John McFarlane to succeed Mr. Martin Gilbert as Chairman of FirstGroup and urged the Company to take certain steps to drive long term operational and strategic performance and unlock shareholder value (the "Sandell Plan" or the "Proposals").

In the letter sent to the Board of FirstGroup today, Sandell welcomes the Board's statement that it remains open to shareholder feedback. However, Sandell urges the Company to reconsider its premature rejection of the Proposals. The letter is accompanied by a White Paper which sets out the details, the benefits and the technical feasibility of the Sandell Plan
(available at: http://www.sandellmgmt.com/news/FirstGroup_White_Paper_Jan2014.pdf).

Sandell also states that, following its detailed discussions with the Company, it has considered the relatively minor issues raised by the Company. Sandell has updated its analysis to address these issues and to take into account changes in market conditions since its discussions with FirstGroup began. The White Paper includes this updated analysis.

The White Paper includes detail of why Sandell believes the Proposals would provide the following operational and financial benefits to the Company:

Operational benefits

  • Stronger and clearer focus
  • Better incentives for management
  • Improved accountability to shareholders
  • Improved transparency
  • Additional cash for reinvestment

Financial benefits

  • Improved valuation of FirstGroup US
  • Lower overall cost of capital
  • Reduced debt and lower interest payments

The Sandell Plan also addresses what it believes is the key reason behind the Company's consistently poor execution, namely the increased complexity of the business since the acquisition of Laidlaw International Inc.

Sandell believes that, if the Sandell Plan were to be implemented, both FirstGroup US[1] and New FirstGroup[2] would be focused businesses with independent accountable boards, right-sized balance sheets and motivated management teams that are appropriately incentivised to deliver long-term returns to shareholders.

Sandell emphasised that the Sandell Plan is not a replacement for a sound turnaround plan. Instead, Sandell believes the Proposals are best carried out in conjunction with such a plan to improve the plan's chances of success. Although Sandell believes the basic tenets behind the Company's strategic plan are sound, Sandell remains concerned about its execution. Sandell believes the Proposals provide additional flexibility should the Company's complex turnaround, involving significant investment over many years across several divisions globally, fail to materialise in the timeframe outlined.

Commenting on his continuing dialogue with the Company, Tom Sandell, Chief Executive Officer of Sandell Asset Management, said:

"We believe shareholders strongly support our ideas, and have been encouraged by their reaction since our engagement with the Company became public. The Board's statement that it remains open to shareholder feedback is encouraging and will allow for constructive and open engagement about ways to improve the Company's performance and deliver value to shareholders."

The Sandell Plan includes the following proposals:

  1. Spin-off FirstGroup US: Spin-off FirstGroup US to FirstGroup shareholders. Immediately prior to spin-off, raise new debt at FirstGroup US, with proceeds used to repay the Company's existing debt;
  2. Sell Greyhound: Sell Greyhound, a relatively small non-core asset following the spin-off of FirstGroup US, to focus management attention on the Company's UK businesses; and
  3. Strengthen New FirstGroup's balance sheet: Strengthen New FirstGroup's balance sheet through proceeds from Steps 1 and 2 to better prepare the Company for the upcoming UK rail franchise bids and to invest in the operational turnaround of the UK Bus business.

-------------

[1] Comprising First Student and First Transit

[2] Comprising the remaining UK bus and rail businesses following the spin-off of FirstGroup US and the sale of Greyhound

Important Notices

This announcement is not intended to and does not constitute or form any part of an offer to sell or subscribe for or an invitation to purchase or subscribe for any securities or the solicitation of an offer to purchase or subscribe for any securities. In particular this announcement is not a "financial promotion" for purposes of the Financial Services and Markets Act 2000, nor a prospectus. Nothing in this announcement constitutes legal, tax, accounting, regulatory, investment or other advice of any kind to any person in any jurisdiction.

Certain statements in this announcement, including those regarding the possible or assumed future performance of the Company, its subsidiaries, investments or its industry or other trend projections may constitute forward-looking statements. By their nature, forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors which may cause actual results, performance or developments to materially differ from those expressed or implied by those forward-looking statements. Accordingly, no assurance is given that such forward-looking statements will prove to have been correct and any such statements speak only as at the date of this announcement and none of Sandell nor any of their respective affiliates or their respective officers, directors, employees, agents or professional advisers (all such persons together being "Relevant Persons") undertakes any obligation to update these forward-looking statements after the date of this announcement, save to the extent required by applicable law. In particular, but without limitation, no representation or warranty is given by any of the Relevant Persons as to the achievability or reasonableness of, and no reliance should be placed on, any assumptions, targets, forecasts, projections or estimates with regard to anticipated future performance of the Company, its subsidiaries, investments or its industry.

Certain information contained in this announcement has been obtained from third-party sources and whilst each of the Relevant Persons has no reason to believe that such information is false or misleading, no independent verification as to the accuracy or completeness of such third-party information has been undertaken and accordingly no representation or warranty is made by any of the Relevant Persons as to the accuracy or completeness of any such information. The information and opinions contained in this announcement do not purport to be comprehensive, are provided as at the date of this announcement and are subject to change without notice. None of the Relevant Persons undertakes any obligation to update the information and opinions contained in this announcement after the date of this announcement, save to the extent required by applicable law. However, nothing in these notices shall constitute an exclusion of liability for, or exclude a remedy in respect of, fraudulent misrepresentation.

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by the securities and other applicable laws of those jurisdictions and therefore persons into whose possession this presentation comes should inform themselves of and observe any such restrictions. Failure to comply with any such restrictions may constitute a violation of the securities and other applicable laws of any such jurisdiction, for which none of the Relevant Persons will accept any liability.

 

Letter to the Board of FirstGroup plc

15 January 2014

The Board of Directors
FirstGroup plc.
50 Eastbourne Terrace
London W2 6LG

c/o Mr. John McFarlane, Chairman

By Email and By Hand

Dear Sirs,

Re: Proposals to Re-focus FirstGroup plc

We write today to follow up on our previous letter dated 11 December 2013, where we outlined certain steps (the "Sandell Plan" or the "Proposals") which we believe will better position FirstGroup (the "Company") operationally and financially for the long term and will also unlock shareholder value.

Since the public disclosure of the Sandell Plan, we are disappointed that the Company has chosen to characterise the Proposals as containing "structurally flaws" and "inaccuracies". Following our detailed discussions with the Company, we have considered the issues raised by the Company, which, in our view, were relatively minor, and have updated our analysis to address these issues.  In addition, we have taken into account changes in market conditions since our discussions began. We continue to believe that the operational and financial benefits of our Proposals substantially outweigh the potential costs and will maximise shareholder value.

We believe the Company's rejection was premature, without fully appreciating the rationale behind the Proposals. The Sandell Plan is not a replacement for a sound turnaround plan. Instead, Sandell believes its Proposals are best carried out in conjunction with such a plan to improve the plan's chances of success and to provide additional flexibility should a turnaround fail to materialise in the anticipated timeframe. Given the Company's track record of poor execution that forced it into the recent rights issue, its failure to appreciate this last point is particularly disappointing.

Although we believe that the basic tenets behind the Company's strategic plan are sound, we remain concerned about its execution. The Company's current strategic plan is very complex, involving significant investment over multiple years and across multiple divisions globally. Without some necessary change in the Company's current structure, we believe a successful implementation of the strategic plan is far from guaranteed. The Sandell Plan is designed to address what we believe is the key reason behind the Company's consistently poor execution, namely the increased complexity of the business since the acquisition of Laidlaw International Inc.

If the Sandell Plan were to be implemented, both FirstGroup US[1] and New FirstGroup[2] would be focused businesses with independent accountable boards, right-sized balance sheets, and motivated management teams that are appropriately incentivised to deliver long-term returns to shareholders. Taking advantage of the favourable market conditions today, we believe this could be achieved without materially foregoing the potential future upside to shareholders. In fact, we believe that FirstGroup US would likely be rewarded with a multiple at a premium multiple to the current FirstGroup, additionally delivering near-term returns to shareholders.

We are encouraged by the Board's statement that it remains open to shareholder feedback, so, in order to assist the Board in better understanding the Proposals, we have prepared a White Paper, which is attached to this letter. We hope this White Paper will provide a clearer picture to both the Company and the Board regarding the operational and financial benefits, as well as the technical feasibility, of the Sandell Plan.

In particular, the White Paper includes detail of why we believe the Sandell Plan would provide the following operational and financial benefits to the Company:

Operational Benefits

  • Stronger and clearer focus
  • Better incentives for management
  • Improved accountability to shareholders
  • Improved transparency
  • Additional cash for reinvestment

Financial Benefits

  • Improved valuation of FirstGroup US
  • Lower overall cost of capital
  • Reduced debt and lower interest payments

We believe there is strong shareholder support for our ideas and this belief has been reinforced since our engagement with the Company became public. We hope that the Board will reconsider its rejection of the Sandell Plan and recognise that the Proposals can work in conjunction with a sound turnaround plan. We take our stewardship responsibilities very seriously and we hope it is clear from the White Paper that we have conducted a very detailed analysis as to the feasibility and the potential benefits of the Proposals. We firmly believe that the Company should take advantage of the current favourable market conditions to maximise the chance of success at both FirstGroup US and New FirstGroup in the long-term. The favourable market conditions will not continue indefinitely, and the options available to the Company now, may not be available in the future.

As an active owner of the Company, we believe in open and transparent dialogue with other shareholders. Consistent with best practices, we intend to publish the White Paper to enable a broad discussion with other shareholders and stakeholders in the Company. We are eager to have a direct dialogue with the new Chairman and invite the Board to re-engage with us to discuss our Proposals. We look forward to hearing from you.

-------------

[1] Comprising First Student and First Transit

[2] Comprising the remaining UK bus and rail businesses following the spin-off of FirstGroup US and the sale of Greyhound

Yours sincerely,

Thomas E. Sandell
Chief Executive Officer
Sandell Asset Management Corp.
Phone: +1-212-603-5700

 

For further information contact:

Sandell Asset Management Corp. (London)
Felix Lo
+44(0)20-7881-8300

Bell Pottinger (Financial public relations)
Nick Lambert
Victoria Geoghegan
+44(0)20-7861-3232

SOURCE Sandell Asset Management Corp.

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
Building a cross-cloud operational model can be a daunting task. Per-cloud silos are not the answer, but neither is a fully generic abstraction plane that strips out capabilities unique to a particular provider. In his session at 20th Cloud Expo, Chris Wolf, VP & Chief Technology Officer, Global Field & Industry at VMware, will discuss how successful organizations approach cloud operations and management, with insights into where operations should be centralized and when it’s best to decentraliz...
SYS-CON Events announced today that Juniper Networks (NYSE: JNPR), an industry leader in automated, scalable and secure networks, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Juniper Networks challenges the status quo with products, solutions and services that transform the economics of networking. The company co-innovates with customers and partners to deliver automated, scalable and secure network...
Deep learning has been very successful in social sciences and specially areas where there is a lot of data. Trading is another field that can be viewed as social science with a lot of data. With the advent of Deep Learning and Big Data technologies for efficient computation, we are finally able to use the same methods in investment management as we would in face recognition or in making chat-bots. In his session at 20th Cloud Expo, Gaurav Chakravorty, co-founder and Head of Strategy Development ...
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm. In his Day 3 Keynote at 20th Cloud Expo, Chris Brown, a Solutions Marketing Manager at Nutanix, will explore t...
SYS-CON Events announced today that SoftLayer, an IBM Company, has been named “Gold Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. SoftLayer, an IBM Company, provides cloud infrastructure as a service from a growing number of data centers and network points of presence around the world. SoftLayer’s customers range from Web startups to global enterprises.
Imagine having the ability to leverage all of your current technology and to be able to compose it into one resource pool. Now imagine, as your business grows, not having to deploy a complete new appliance to scale your infrastructure. Also imagine a true multi-cloud capability that allows live migration without any modification between cloud environments regardless of whether that cloud is your private cloud or your public AWS, Azure or Google instance. Now think of a world that is not locked i...
Technology innovation is the driving force behind modern business and enterprises must respond by increasing the speed and efficiency of software delivery. The challenge is that existing enterprise applications are expensive to develop and difficult to modernize. This often results in what Gartner calls "Bimodal IT," where business struggle to apply modern tools and practices to traditional monolithic applications. But these existing assets can be modernized and made more efficient without havin...
Most companies are adopting or evaluating container technology - Docker in particular - to speed up application deployment, drive down cost, ease management and make application delivery more flexible overall. As with most new architectures, this dream takes a lot of work to become a reality. Even when you do get your application componentized enough and packaged properly, there are still challenges for DevOps teams to making the shift to continuous delivery and achieving that reduction in cost...
SYS-CON Events announced today that Auditwerx will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Auditwerx specializes in SOC 1, SOC 2, and SOC 3 attestation services throughout the U.S. and Canada. As a division of Carr, Riggs & Ingram (CRI), one of the top 20 largest CPA firms nationally, you can expect the resources, skills, and experience of a much larger firm combined with the accessibility and attent...
SYS-CON Events announced today that Technologic Systems Inc., an embedded systems solutions company, will exhibit at SYS-CON's @ThingsExpo, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Technologic Systems is an embedded systems company with headquarters in Fountain Hills, Arizona. They have been in business for 32 years, helping more than 8,000 OEM customers and building over a hundred COTS products that have never been discontinued. Technologic Systems’ pr...
SYS-CON Events announced today that CA Technologies has been named “Platinum Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY, and the 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. CA Technologies helps customers succeed in a future where every business – from apparel to energy – is being rewritten by software. From ...
SYS-CON Events announced today that HTBase will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. HTBase (Gartner 2016 Cool Vendor) delivers a Composable IT infrastructure solution architected for agility and increased efficiency. It turns compute, storage, and fabric into fluid pools of resources that are easily composed and re-composed to meet each application’s needs. With HTBase, companies can quickly prov...
SYS-CON Events announced today that Loom Systems will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Founded in 2015, Loom Systems delivers an advanced AI solution to predict and prevent problems in the digital business. Loom stands alone in the industry as an AI analysis platform requiring no prior math knowledge from operators, leveraging the existing staff to succeed in the digital era. With offices in S...
In his session at Cloud Expo, Alan Winters, an entertainment executive/TV producer turned serial entrepreneur, will present a success story of an entrepreneur who has both suffered through and benefited from offshore development across multiple businesses: The smart choice, or how to select the right offshore development partner Warning signs, or how to minimize chances of making the wrong choice Collaboration, or how to establish the most effective work processes Budget control, or how to max...
What if you could build a web application that could support true web-scale traffic without having to ever provision or manage a single server? Sounds magical, and it is! In his session at 20th Cloud Expo, Chris Munns, Senior Developer Advocate for Serverless Applications at Amazon Web Services, will show how to build a serverless website that scales automatically using services like AWS Lambda, Amazon API Gateway, and Amazon S3. We will review several frameworks that can help you build serverle...