FirstGroup PLC (LON:FGP) has put its Manchester bus operation, one of its largest regional bus divisions, up for sale in a cut-price offering.
According to a report from the Telegraph on Monday, the FTSE 250 transport operator could sell the operation, which previously had an annual turnover of £100mln, for as cheap as £20mln, with different sites such as depots at Bury, Oldham, and Bolton being sold to different companies.
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The newspaper’s report said the sale was part of an effort to reduce mounting losses at the company after the Manchester division, its fourth largest, fell into the red and is currently the UK’s worst performing network.
The move comes as FirstGroup recently found itself under pressure by activist investors to break up the firm after it refused a takeover bid from Apollo Global Management in 2018.
However, the new chief executive Matthew Gregory, who became CEO after previously serving as chief financial officer, said in November that the group’s margins were improving and that there was no need for a radical overhaul.
However, if the Manchester bus network is sold off, it may signal that some whispering of a breakup may have won around some on FirstGroup’s board.
In a note to clients, analysts at City broker Liberum said that they believed the company “has to shrink the number of challenges it faces through disposals, to better focus management time and capital on the remaining businesses to improve the chances of executing a turnaround”.
The broker added that aside from the poor financial performance there was also an ongoing threat of re-regulation of bus services in the region, creating uncertainty that would be “a major deterrent to potential buyers”.
However, Liberum said that a re-regulation “would help a sale process since new entrants might see value in securing depot capacity ahead of contract tenders”.
In late-morning trading Tuesday, FirstGroup shares were down 1.3% at 94.3p.