Hours ahead of a crunch meeting on Tuesday afternoon, Coast Capital, an activist investor in transport operator FirstGroup PLC (LON:FGP), has voiced concerns over what it says are comments by its chairman and chief executive that the firm was considering the sale of its US bus business, First Student.
In a letter to other shareholders, Coast, which holds a near-10% stake in FTSE 250 FirstGroup, said it had been informed that chairman Wolfhart Hauser and CEO Matthew Gregory had told some investors that “everything is for sale at the right price” and was also exploring the sale of First Student to private equity groups.
If true, the plans would run counter to FirstGroup’s previously announced strategy in May, when the firm said it would sell off its Greyhound and UK bus divisions in order to focus on its core North American operations, which supposedly included First Student.
Coast called on the board to “clarify its strategy” as to whether it was considering a sale of First Student, adding that the board had currently failed to address the hedge fund’s “grave concerns”.
“At the very least, conflicting accounts of the Company’s strategy are circulating among some shareholders. At the worst, certain shareholders are being deprived of the opportunity to make strategic as well as investment decisions based on accurate information from the Company (including voting decisions at [Tuesday's meeting])”, Coast said.
Commenting on the content of the letter, a FirstGroup spokesperson said the “desperate and spurious allegations” were a “further ploy designed to discredit and destabilise the board and the company”.
They added: “We have confirmed that these claims are baseless in fact and law, and told that to Coast. We have asked them to provide evidence to substantiate their claims and they have not been able to provide any such evidence. Conflicting accounts of the company’s strategy are not circulating amongst shareholders. The company’s strategy is as stated publicly on 30 May 2019. If Coast wish to raise this matter with the appropriate regulator, they should detail the basis and source of their allegations, for these to be addressed.”
Coast Capital is seeking to remove six of FirstGroup’s 11 directors at Tuesday’s meeting, which is due to be held at 2pm, including the chairman and CEO in order to replace them with its own nominees.
The activist investor was given a boost on Monday when media reports emerged that institutional investors Schroders and Columbia Threadneedle, which hold stakes of around 9% and 10% in FirstGroup respectively, were planning to vote against Hauser at the meeting.
A spokesman for Columbia also told Proactive that in addition to the chairman the company had also voted against two of FirstGroup's "longest-serving board directors", which they said would "better realise value for shareholders".
In lunchtime trading on Tuesday, FirstGroup shares were down 0.9% at 97.6p.