FirstGroup plc
FirstGroup plc
395 King Street
Aberdeen, AB24 5RP
United Kingdom
Telephone: (+44 1224) 650 100
Fax: (+44 1224) 650 140
Web site: http://www.firstgroup.com
Public Company
Incorporated: 1989
Employees: 74,000
Sales: £3.71 billion (2007)
Stock Exchanges: London
Ticker Symbol: FGP
NAIC: 482111 Line-Haul Railroads; 485111 Mixed Mode Transit Systems; 485112 Commuter Rail Systems; 485113 Bus and Other Motor Vehicle Transit Systems; 485210 Interurban and Rural Bus Lines; 485410 School and Employee Bus Transportation; 488210 Support Activities for Rail Transportation
FirstGroup plc is an operator of public transportation systems. Based in Scotland, FirstGroup has bus and rail operations in the United Kingdom and North America. Altogether, the company transports more than two billion passengers per year, in addition to handling freight by train.
More than 260 million passengers ride its U.K. railways every year, while millions more ride on one of its bus lines. The company is also responsible for getting
two million children in the United States and Canada to school every day. FirstGroup became the leading private school bus operator in the United States via its 2007 acquisition of Laidlaw International, which also gave it ownership of the famous Greyhound brand. Some of FirstGroup’s smaller operations offer other transitrelated services.
SCOTTISH ORIGINS
The 1985 Transport Act set out to improve the United Kingdom’s busing system through competition. Six dozen different companies subsequently sprang up to take over most of the country’s bus lines, which had until then been run by the government-controlled National Bus Company.
The first of the buyouts that created FirstGroup plc occurred in 1989, when a group led by Moir Lockhead acquired a local bus line near Aberdeen, Scotland, called Grampian Regional Transport, paying £4.5 million. Lockhead, would build one of the largest transport companies in the United Kingdom, had started his career at the age of 16 as an apprentice mechanic with United Buses.
Grampian had revenues of roughly £10 million and a fleet of 200 buses when it was bought out. The company quickly went on the acquisition trail, buying Midland Bluebird in 1990. Other early purchases included East Anglia’s Eastern Counties Holdings, acquired for about £7 million in 1994. The renamed company, GRT Bus Group PLC, went public on the London Stock Exchange in 1994, when its annual turnover was more than £40 million.
MERGER WITH BADGERLINE GROUP
In 1995 GRT merged with Badgerline Group to create FirstBus plc. Although GRT was half the size of Badger-line, the deal was structured as a merger rather than a takeover. GRT was more profitable, noted Britain’s Financial Times, and it was hoped its techniques could boost operating margins at the combined company, while benefiting from better economies of scale.
Badgerline, based in Weston-super-Mare, Avon, had been formed in 1986 to take over some Bristol operations from the National Bus Company. By the time of its initial public offering in November 1993, it had a valuation of £100 million, twice that of GRT, and had a fleet of 2,300 vehicles concentrated in the south of England and Wales.
FirstBus had a market capitalization of £265 million after the merger. The combined fleet numbered 5,600 vehicles and there were more than 14,000 employees. Among U.K. bus operators, FirstBus was second only to Stagecoach, based in northern Scotland. A handful of other publicly traded companies dominated the rest of the market.
A pair of acquisitions in 1996 propelled FirstBus to the top of the U.K. bus industry. Greater Manchester Buses North was bought for £47 million in March of that year. FirstBus bought SB Holdings (SBH) of the Glasgow area for £110 million soon after, though it had to sell parts of SBH to satisfy antitrust regulators. After these purchases, combined revenues exceeded £500 million and there were 20,000 employees fielding a fleet of 8,000 buses. The company’s debt was also large in relation to shareholder funds, but considered to be adequately covered by earnings.
BEYOND BUSES
As the period of consolidation in the U.K. bus industry ended, FirstBus turned its attention to organic growth and ventures in new industry sectors and geographical areas. Ten years after deregulation of the bus lines, Britain’s passenger railways were being privatized, divided into 25 different franchises. The company entered the passenger rail business by acquiring a 24.5 percent holding in Great Western Trains in 1996 as it underwent a management buyout. The Great Eastern rail franchise was added in December 1996.
FirstBus was renamed FirstGroup plc in 1997, reflecting its broadened reach. The buying spree continued, with Southampton Citybus acquired for £11 million. This added 440 employees and more than 150 buses.
There were also a couple of short-lived detours. The company acquired a controlling interest in a small regional airport in Bristol in 1997, but sold it off in 2000. The company began operating a line of roughly 700 buses in Hong Kong in September 1998 via a partnership with New World Development. However, this was also divested a couple of years later.
By the end of the decade, FirstGroup had a fleet of 9,000 buses and a staff of 30,000 employees. Rail accounted for half of total revenues of more than £1 billion. The stage was set for a major acquisition that would bring the company to a vast new market across the ocean.
FirstGroup bought Ryder Public Transportation Services, Inc., for $940 million in 1999, giving the company the second leading position in the private school bus business in the United States. The unit, previously part of Ryder System, Inc., was renamed First Student. FirstGroup added a U.S. transit contracting and management business from a subsidiary of U.K. rival Stagecoach Group PLC in May 2003, paying $22.5 million.
The company also continued to build its rail business through acquisition, picking up freight line GB Railways in July 2003 at a cost of £22 million. GB was acquired to help FirstGroup to reenter the bidding for the Greater Anglia franchise; however, it lost out to rival National Express Group plc. In 2007, it was outbid for another key franchise, South West Trains, by Stagecoach.
COMPANY PERSPECTIVES
We want people to have a choice in how they travel. Our vision is for public transport to become an attractive alternative to the car, encouraging our existing customers to use our services more often and attracting new passengers. Our vision is to be part of the process which delivers modal shift away from cars to public transport. Our vision is for the majority of children to travel to school by bus; for commuters to consider rail and bus as viable alternatives to their car; for trips to town to be made by bus; and for weekend and leisure visits to be made by train.
BUYING LAIDLAW IN 2007
In 2007 FirstGroup agreed to buy Laidlaw International, Inc., for $3.6 billion (£1.8 billion) plus upwards of $700 million in assumed debt. The price was considered high by some analysts, but combining the businesses offered instant cost savings. Laidlaw, based in Chicago, owned Greyhound and also had the largest school bus operation in the United States. The buy raised FirstBus’s number of school buses to 63,000.
There was much speculation that Greyhound would soon be sold if the Laidlaw deal were to be approved by antitrust regulators. Greyhound differed from First-Group’s other businesses in that it was dependent on retail customers, and operated over long distances.
FirstGroup also made a smaller U.S. acquisition in 2007, buying Cognisa Transportation, Inc., an Atlanta-based operator of shuttles for airports and corporate clients. While FirstGroup was rapidly becoming a giant in the U.S. market, it was also bringing American concepts to the United Kingdom. It tested yellow school buses at a few communities in Britain in 2007, reporting positive feedback.
The growing global conglomerate sought more space for its administrative functions. A proposal to build a £10 million headquarters in the company’s hometown of Aberdeen was scrapped in November 2006. Ironically, the approval process had stalled due to protesters voicing complaints about excessive traffic, one of the things the company was dedicated to improving through its efforts in public transportation. FirstGroup did not give up on Aberdeen as the site for its future headquarters, and submitted another proposal a few months later.
Frederick C. Ingram
KEY DATES
- 1986:
- Badgerline Group is formed to take over some Bristol area bus operations from the National Business Company.
- 1989:
- Moir Lockhead leads management buyout of Aberdeen area’s Grampian Regional Transport (GRT).
- 1993:
- Badgerline goes public.
- 1994:
- GRT Bus Group PLC is floated on the London Stock Exchange.
- 1995:
- GRT merges with Badgerline Group to create FirstBus plc.
- 1996:
- FirstBus becomes the leading U.K. bus operator; company begins acquiring rail franchises.
- 1997:
- FirstBus is renamed FirstGroup plc.
- 1998:
- Revenues exceed £1 billion.
- 1999:
- FirstGroup enters U.S. school bus business through acquisition of Ryder subsidiary.
- 2003:
- Revenues exceed £2 billion.
- 2007:
- FirstGroup buys Greyhound owner and school bus giant Laidlaw International.
PRINCIPAL SUBSIDIARIES
Centre West London Buses Ltd; First Aberdeen Ltd; First Beeline Buses Ltd; First Bristol Buses Ltd; First Capital East Ltd; First Capital North Ltd; First Somerset & Avon Ltd; First Cymru Buses Ltd; First Eastern Counties Buses Ltd; First Edinburgh Ltd; First Essex Buses Ltd; First Glasgow (No 1) Ltd; First Glasgow (No 2) Ltd; First Hampshire and Dorset Ltd; First Manchester Ltd; First Midland Red Buses Ltd; First PMT Ltd; First South Yorkshire Ltd; First Wessex Ltd; First West Yorkshire Ltd; First Devon & Cornwall Ltd; First York Ltd; Leicester CityBus Ltd; Northampton Transport Ltd; First Student Inc. (U.S.A.); FirstBus Canada Ltd; First-Group America Inc. (U.S.A.); FirstGroup USA Inc.; Cardinal Transportation Group Inc. (U.S.A.); Cardinal Coach Lines Ltd (Canada; 60%); First Transit Inc. (U.S.A.); SKE Support Services, Inc. (U.S.A.); First Capital Connect Ltd; First Great Western Link Ltd; FirstInfo Ltd; First/Keolis TransPennine Ltd (55%); Hull Trains Company Ltd (80%); GB Railfreight Ltd; First ScotRail Ltd.
PRINCIPAL DIVISIONS
UK Bus; UK Rail; North America.
PRINCIPAL COMPETITORS
Stagecoach Holdings plc; National Express Group plc.
FURTHER READING
August, Oliver, “Conditions on FirstBus Deal Suggest Clamp-down,” Times, January 25, 1997, p. 31.
Bagnall, Sarah, “Merger to Create £265M Bus Firm—Badger-line and GRT—FirstBus,” Times, April 5, 1995.
Bain, Simon, “Travelling in Style—How Does the Road Ahead Look for Transport Company FirstGroup?” CA Magazine (Edinburgh), February 2000, pp. 48+.
Batchelor, Charles, “FirstBus Just the Ticket for Citybus,” Financial Times, July 8, 1997, p. 23.
Bolger, Andrew, “Badgerline Float Price Set at 115p,” Financial Times, November 11, 1993, p. 22.
Buxton, James, “First Class,” CA Magazine (Edinburgh), September 2003, pp. 80+.
Calder, Colin, “Flotation to Win Millions for Busmen—GRT Bus Group—Scotland,” Sunday Times, April 10, 1994.
“CEO Interview: Moir Lockhead; FirstGroup PLC,” Wall Street Transcript Europe, February 8, 1999.
“CEO Interview: Moir Lockhead; FirstGroup PLC,” Wall Street Transcript Digest, October 1, 2002.
“CEO Interview: Moir Lockhead; FirstGroup PLC,” Wall Street Transcript Digest, August 18, 2003.
Clement, Barrie, “First Group Trounced by National Express in Anglia Franchise,” Independent, December 23, 2003.
Duncan, Catriona, and Monia Mtar, “Determinants of International Acquisition Success: Lessons from FirstGroup in North America,” European Management Journal, December 2006, pp. 396+.
Dyer, Geoff, “A Hunger for Life in the Fast Lane,” Financial Times, May 20, 1995, p. 1.
________, “Only a Little Room Left Up Top,” Financial Times, May 14, 1996, p. 22.
“End of the Line for Laidlaw; British Outfit FirstGroup Will Buy the Bus-Company Operator in a $3.6 Billion Deal,” Business Week Online, February 12, 2007.
“FirstGroup Gets Up Steam As It Waits on US Antitrust Clearance,” Citywire, May 16, 2007.
“FirstGroup Signals North American Expansion,” AFX.COM, November 5, 2003.
Flynn, Julia, “FirstGroup to Buy Bus Unit of Ryder,” Wall Street Journal Europe, July 22, 1999, p. 3.
Gresser, Charis, “FirstBus to Bid for Stake in Bristol Airport,” Financial Times, August 22, 1997, p. 17.
Grimond, Magnus, “FirstBus Makes Good Headway,” Independent, June 11, 1997, p. 26.
Hall, Liz, “Change Driver,” People Management (London), September 1, 2005, pp. 42+.
Hawkins, Ross, “British Rail Companies Turn Profits on American School Buses,” Evening Standard (U.K.), July 15, 2001.
“Merger Makes First Bus Britain’s Second,” Guardian, April 5,1995, p. 21.
Mesure, Susie, “A Public Transport Boss Who Is Driving a Green Agenda,” Independent, February 17, 2007, p. 56.
Milmo, Dan, “FirstGroup Catches America’s School Buses and Greyhounds in £1.8Bn Deal,” Guardian, February 10, 2007, p. 40.
Murden, Terry, “FirstBus Buys SBH to Take Lead in Britain,” Sunday Times, May 12, 1996.
“New Rail Barons,” Economist, December 7, 1996.
Osborne, Alistair, “FirstGroup Chief Defends Rail Privatisation As Subsidies Fall; Great Eastern Returns Cash to Taxpayer, but Infrastructure Is a ‘Let-Down,’” Daily Telegraph, November 6, 2003.
Osborne, Alistair, and Richard Blackden, “FirstGroup Catches the Greyhound Bus,” Daily Telegraph, February 10, 2007.
Pangalos, Philip, “Expansion Is Just the Ticket for Scottish Bus Group—GRT Bus Group,” Times, June 29, 1994.
Rich, Motoko, “FirstBus Will Spend £80M to Update Fleet,” Financial Times, November 6, 1996, p. 10.
Urquhart, Frank, “Setback for Transport Giant’s Bid to Build Global HQ in City,” Scotsman, October 21, 2005, p. 27.
________, “Transport Giant Drops £10m HQ Plan,” Scotsman, November 9, 2006, p. 20.
Urry, Maggie, “Driving Force at the Head of the Herd,” Financial Times, January 6, 2003, p. 18.
Welsh, Gordon, Leslie Davis, and Cliff Henke, “Big U.K. Companies Still Show Interest in U.S.; Merger Mania Continues in Private Bus Industry, but Latest Twist Is Transferring U.S. Ideas Back to ‘Blighty,’” Metro, September/October 2000, pp. 86+.
West, Karl, “Greyhound Owner Not Quick Enough to Escape FirstGroup,” Daily Mail, February 10, 2007.
Wright, Robert, “From Eastern Scotland’s Lanes to the Open Plains of North America,” Financial Times, February 10, 2007, p. 17.