FirstGroup to re-enter London bus market amid rail nationalisation

FirstGroup is set to renter the London bus market with a 12 per cent share after agreeing a takeover worth £90million.

The Aberdeen-based transport group, which sold off the lion’s share of its First London business to Go-Ahead in 2013, said it would buy the RATP Dev Transit London division of France’s RATP Développement.

It sees FirstGroup take on four owned and six leased depots across Central and West London, a fleet of 1000 buses and 3,700 employees – more than 80 per cent of whom are drivers.

FirstGroup has ramped-up acquisitions of bus and coach companies this year, including Anderson Travel and York Pullman, ahead of Labour plans to nationalise English passenger railway franchises as operator contracts expire.

The Government has earmarked FirstGroup’s South West Trains, as well as C2C and Greater Anglia, to follow East Coast Mainline, TransPennine, and Northern and South Eastern (LNER) back into public ownership from next year.

However, the Government has so far spared FirstGroup’s Avanti West Coast and Great Western Railway businesses, the latter of which will see its contract expire in June 2025.

FirstGroup also owns open-access operators Lumo and Hull Trains, which manage trains on mainline routes but do not receive taxpayer cash or have franchises with the UK Government.

Back on board: FirstGroup sold its London bus offering to Go-Ahead in 2013

The takeover of RATP London is expected to be completed in the first half of next year, subject to the approval of Transport for London and French authorities.

It will be financed with £45million from FirstGroup’s existing cash reserves and the assumption of RATP London’s asset backed vehicle finances leases worth another £45million.

The business secured revenues of £271million for the 2023 calendar year and is valued at £100million of physical assets.

FirstGroup said RATP London brings ‘an experienced management team’, who will remain with the business, with revenues projected to grow to up to £350million annually over the next five years.

Boss Graham Sutherland added: ‘This is a significant acquisition for the Group that will diversify our portfolio and materially grow our earnings in the medium term.

‘It allows us to enter the London bus market at scale and will also bolster our credentials as we participate in future franchising opportunities across the UK.’

FirstGroup shares were up 6 per cent by midafternoon to 163.4p, driving gains to around 0.4 per cent over the last 12 months. 

Broker Peel Hunt upgraded its FirstGroup target price from 200p to 210p, which would mark its highest level since 2012. 

Analyst Alexander Paterson said: ‘The RATP acquisition is not riskless, but, on balance, it provides growth and diversification.’