FirstGroup to re-enter London bus market amid rail nationalization

FirstGroup will lease the London bus market with a 12 per cent stake after agreeing a takeover worth £90m.

The Aberdeen-based transport group, which sold most of its First London business to Go-Ahead in 2013, said it would buy the RATP Dev Transit London division of France’s RATP Développement.

FirstGroup runs four owned and six leased depots in central and west London, a fleet of 1,000 buses and 3,700 employees, more than 80 per cent of whom are drivers.

FirstGroup has stepped up acquisitions of bus and coach companies this year, including Anderson Travel and York Pullman, ahead of Labor plans to nationalize English passenger rail franchises as the operators’ contracts expire.

The Government has earmarked FirstGroup’s South West trains, as well as C2C and Greater Anglia, to follow the East Coast Mainline, TransPennine and Northern and South Eastern (LNER) back into public ownership from next year.

However, the Government has so far saved FirstGroup’s Avanti West Coast and Great Western Railway businesses, whose contract is set to expire in June 2025.

FirstGroup also owns open access operators Lumo and Hull Trains, which run trains on mainline routes but do not receive taxpayer cash or have franchises with the UK Government.

The acquisition of RATP London is expected to be completed in the first half of next year, subject to approval by Transport for London and the French authorities.

It will be funded by £45m from FirstGroup’s existing cash reserves and the assumption of RATP London asset-backed vehicle finance leases worth a further £45m.

The company posted revenue of £271m for calendar year 2023 and is valued at £100m in physical assets.

FirstGroup said RATP London brings “an experienced management team”, who will remain with the business, with revenues expected to grow to £350m annually over the next five years.

Boss Graham Sutherland added: ‘This is a significant acquisition for the Group which will diversify our portfolio and substantially increase our profits over the medium term.

“It allows us to enter the London bus market on a large scale and will also strengthen our credentials as we participate in future franchise opportunities across the UK.”

first group shares They rose 6 per cent by mid-afternoon to 163.4 pence, taking gains to around 0.4 per cent over the past 12 months.

Broker Peel Hunt upgraded his price target on FirstGroup from 200p to 210p, which would mark its highest level since 2012.

Analyst Alexander Paterson said: “The acquisition of RATP is not without risk, but overall it provides growth and diversification.”