However, chairman Wolfhart Hauser bowed to pressure after hefty shareholder opposition to his re-appointment and announced that he would not be standing for re-election at the FTSE 250 transport group’s AGM on 25 July.
READ: Coast Capital questions FirstGroup strategy, claims execs considering sale of US school bus business
In an announcement, Hauser said that with a “clear path forward laid out for the group” following a strategy update at the end of May, which included plans to sell off its Greyhound bus business, it was now “time for [him] to move on”.
Hauser, alongside chief executive Matthew Gregory and four other directors, were the target of an attempt by Coast to unseat most of FirstGroup’s 11-person board, replace them with its own nominees and implement plans to break up the company.
Coast, which owns a stake of nearly 10% in FirstGroup, had been given a boost earlier in the week when media reports emerged that institutional investors Schroders and Columbia Threadneedle, which own around 9% and 10% of the firm respectively, would be voting against Hauser’s re-appointment at the EGM.
However, when the votes were finally cast Coast failed to oust any members of the board, with FirstGroup saying shareholders had “voted decisively" against Coast Capital’s attempt to take control of the company.
New York-based Coast has been agitating for a radical overhaul of the company’s operations for some time, having previously lambasted the incumbent management for having presided over a period of value destruction at the firm, particularly its running of UK rail franchises, which Coast has described as “an enormous black hole of capital”.
The hostility to FirstGroup’s activities in the rail industry was brought into sharp relief over the weekend when it emerged that the company could be in line to take over the West Coast rail franchise if it managed to see off the boardroom coup on Tuesday.
In a statement following the meeting and Hauser’s plans to step down, Coast said they viewed the chairman’s exit as “a constructive first step in the direction of finally achieving full value for shareholders”.
They added that FirstGroup needed a board populated by directors that had “relevant experience” to execute a restructuring and that they would continue to pursue their goals “vigorously” and bring forward their own near-term program to boost the company’s fortunes.
Victory will not end activist pressure, says broker
In a note, analysts at broker Liberum said while FirstGroup may have claimed victory at Tuesday’s meeting, Coast was showing “no sign of relenting” meaning that management would need to execute its turnaround strategy under “significant pressure” from shareholders.
However, the broker added that they were “cautiously optimistic” that the group’s management would be able to crystallise value from the turnaround process “in the foreseeable future” and reiterated their ‘buy’ rating and 130p target price on the stock.
In late-morning trading on Wednesday, FirstGroup shares were 0.7% lower at 97.6p.