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FirstGroup investor Tchenguiz accuses board of “misleading” investors

Property tycoon Robert Tchenguiz has put out a scathing statement saying the travel group's management last week “misled or at best confused the public”

FirstGroup - Greyhound bus
The Greyhound bus business is up for sale, possibly

FirstGroup PLC’s (LON:FGP) largest shareholder has demanded a shareholder meeting as he said the bus and train operator’s board was giving “confusing and misleading” statements to investors.

Last Thursday the FTSE 250-listed group said the formal sale of its North American Greyhound coach division is “well advanced” with talks being held with potential buyers as part of a ‘rationalisation’ plan announced in May.

READ: FirstGroup plunges as losses and borrowings widen

On Monday, property tycoon Robert Tchenguiz, who owns a 4.7% stake in the company, issued a scathing statement in which he said FirstGroup’s management last week “misled or at best confused the public”.

Tchenguiz said he had been “forced” to make a public request after privately urging chairman David Martin to “publicly clarify” that the May’s strategic plan “is not being adopted by the company”.

After last week’s announcement from the company, Tchenguiz said there was “direct contradiction” between the chairman’s statements about carrying out a rationalisation of the portfolio and chief executive Matthew Gregory’s comments about focusing on the US business. 

“Clearly, the rationale of a vibrant US business which is being managed in Aberdeen, six time zones away, is not the most effective or efficient management strategy,” the investor added, also pointing out that a smaller competitor has just attracted investment in the billions from major North American pension funds.

Tchenguiz said the company “has not made clear that it is conducting a strategic review. This omission begs the question as to whether the company is ignoring investors’ requests in order to continue a flawed, status quo strategy presented in May”.

Company's response

In a response on Monday, FirstGroup said the board “has been clear…that it is intent on realising value for all shareholders and is focused on actively managing the entire portfolio by all appropriate means”.

Saying it sees “limited synergies between the divisions, particularly between the UK and North America”, the company said that with the priority being to realise greater value from the group, “this is best achieved through a rationalisation of the current portfolio”.

Its chairman’s and CEO’s statements “clearly reflect this position and are consistent”, the company insisted, with Martin giving his first public statement since being appointed on 15 August to say: “We will continue to actively evaluate all options across our entire portfolio to ensure we remain focused on the most appropriate and deliverable means to realise shareholder value.”   

While Gregory added: “We are intent on realising value for shareholders and will actively manage our entire portfolio by all appropriate means.”

Meanwhile, the Competitions and Markets Authority said it was consulting on proposed undertakings from FirstGroup’s joint venture with Trenitalia to run the UK West Coast franchise. 

The undertakings included ensuring that they maintain the availability of advance fares and how any future fare increases might be limited.

Last week, Coast Capital, another one of FirstGroup’s largest shareholders, continued its calls for the break-up of the business and said it was pleased that Martin seemed to be in agreement.

However, the US hedge fund seemed to be of the same opinion as Tchenguiz in not backing management's strategy. 

“It is clear to us that the strategic ‘plan’ presented in May of 2019 is of no value to investors, and investors will be well served through the adoption of an entirely different strategy – one which begins with an immediate and open exploration of the many strategic options available to investors with regards to First Student and First Transit operations in North America”.

Previously Coast called the plans to sell the Greyhound business “half baked” and “the height of folly”.

 

Quick facts: FirstGroup

Price: 115.4 GBX

LSE:FGP
Market: LSE
Market Cap: £1.4 billion
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