FGP Firstgroup Plc

FIRSTGROUP PLC
PROPOSED TENDER OFFER

• Proposed tender offer to return up to £500 million to shareholders at 105 pence per share
• Premium of 9.2 per cent. to the closing price on 26 October
• Tender Offer subject to shareholder approval; circular to be published today
• Irrevocable undertaking from Coast Capital Management to support the resolutions and tender its full holdings
• Tender proceeds expected to be despatched to Shareholders in December

FirstGroup plc (“FirstGroup” or the “Company”) announces the proposed return of up to £500 million to its shareholders (the “Shareholders”) by way of a tender offer at 105 pence per share (the “Tender Offer”, which is summarised below).

On 22 July 2021, FirstGroup completed the disposal of its First Student and First Transit businesses to EQT Infrastructure (the “Transaction”) for net disposal proceeds of $3,123 million (the “Net Disposal Proceeds”). On the same date, FirstGroup announced its intention to increase the proposed return of value to £500 million from £365 million previously (the “Return of Value”).

Following consultation with Shareholders, the Board has decided that the appropriate first step is to conduct the Return of Value by way of the Tender Offer. Shareholders are therefore being invited to tender some or all of their Ordinary Shares for purchase on the terms and subject to the Conditions set out in the Circular to be published today.

Shareholders may decide not to participate fully or partially in the Tender Offer for a number of reasons, including their view of the potential for the value of the Company to increase in the future. If the full £500 million is not returned to Shareholders through the Tender Offer, the Board intends to undertake a second phase of the Return of Value to return any remaining surplus cash following completion of the Tender Offer to Shareholders. If required, it is expected that this second phase would take place by way of a share buyback of up to approximately £50 million, with any meaningful surplus above this amount being returned by way of a special dividend (with accompanying consolidation and sub-division of the Company’s share capital (the “Share Consolidation”)).

In addition to the Return of Value, the Board reiterates its commitment to keeping the balance sheet position of the Group under review and will consider the prospects for making further additional distributions to Shareholders in due course, following crystallisation of the First Transit Earnout of up to $240 million (fair valued in the Group’s recent full year results at $140 million (£102 million) for accounting purposes), realisation of value from the sale of the properties retained and consideration deferred in the recent sale of Greyhound Lines Inc. to FlixMobility GmbH, and the potential release of monies from pension escrow (of up to £117 million). The Board also notes the capacity to increase gearing over time, as end market conditions and hence business performance improves.

Commenting, David Martin, FirstGroup Executive Chairman said:
"I am very pleased to announce the launch of the proposed Tender Offer. This marks the culmination of our portfolio rationalisation strategy, as announced in December 2019, which has refocused the Group on its leading UK public transport businesses. In doing so, we have created a cash generative company with a well-capitalised balance sheet, a focused strategy and attractive growth prospects in our markets. The policy backdrop in the UK has never been more supportive and public transport has a critical role to play in helping communities and economies build back better and more sustainably. The premium for the Tender Offer reflects our confidence in our future prospects, as well as the substantial further sums expected to be realised by the Group over time from the disposals completed this year."

Key elements of the Tender Offer

• £500 million is available to be returned to Qualifying Shareholders via the purchase of up to 476,190,476 Ordinary Shares (representing up to approximately 38.9 per cent. of the Issued Ordinary Share Capital).
• The Tender Price will be 105 pence per Ordinary Share, a premium of 9.2 per cent. to the closing price of 96.15 pence per Ordinary Share on 26 October 2021.
• The Tender Offer is conditional on, among other things, the approval of Shareholders, which will be sought at a general meeting of the Company to be held at 11 a.m. on 18 November 2021 (the "General Meeting").
  • The Company will also seek authority to undertake the second phase of the Return of Value at the General Meeting.
• The Tender Offer will open on 28 October 2021 and will close at 1.00 p.m. on 29 November 2021.
• Proceeds are expected to be despatched to Shareholders who successfully tender Ordinary Shares in December 2021.

Coast Capital Management participation in the Tender Offer
Coast Capital Management currently controls, in aggregate, 156,749,809 Ordinary Shares, representing approximately 12.82 per cent. of the Issued Ordinary Share Capital as at the Latest Practicable Date. Coast Capital Management will participate in the Tender Offer in full, and has irrevocably undertaken to vote in favour of the Resolutions and to tender, in aggregate, 156,749,809 Ordinary Shares under the Tender Offer at the Tender Price.

Benefits of the Tender Offer
The benefits of the Tender Offer for Shareholders as a whole are that:

• it is available to all Qualifying Shareholders regardless of the size of their holdings;
• it means Qualifying Shareholders who participate will receive, for Ordinary Shares successfully tendered, a Tender Price that represents a premium of 9.2 per cent. to the closing price of 96.15 pence per Ordinary Share on 26 October 2021;
• it provides Qualifying Shareholders who wish to reduce their holdings of Ordinary Shares with an opportunity to do so at a market-driven price with an appropriate premium; and
• it permits Shareholders who wish to retain their current investment in FirstGroup and their Ordinary Shares to do so and no Shareholder is required to participate in the Tender Offer.

The Company intends to cancel all of the Ordinary Shares acquired in connection with the Tender Offer. As a result, the Tender Offer should have a positive impact on the Group’s earnings per share (assuming earnings stay the same).

Current trading update
On 21 October 2021, FirstGroup announced the sale of Greyhound Lines, Inc. (the US Greyhound operating business) to a wholly-owned subsidiary of FlixMobility GmbH ("FlixMobility"), completing the Company’s stated strategy to focus on its leading UK public transport businesses. The sale was not subject to any closing conditions and completed on the same day. The announcement noted that the sale resulted in cash consideration to the Group of $172m (comprising $140m paid initially, with $32m in unconditional deferred consideration to be paid in instalments over eighteen months from the sale), that certain Greyhound properties have been retained by FirstGroup (initially being leased back to Greyhound at market rates but expected to be sold over the next three to five years) and that FirstGroup retains certain legacy Greyhound net liabilities (including pension, self-insurance, finance leases settled at closing of the sale, grant receivables, liability buyout premia and certain other items).

On 21 October 2021, the Group also stated that "trading in the Group's continuing businesses year to date has been in line and there is no change to management's expectations” for the continuing Group for the current financial year, and that following the Greyhound transaction "and with certain First Bus capital expenditure payments now falling after the period end and better than expected working capital flows, the Group estimates that adjusted net debt¹ at the end of the current financial year will be c.£ 80-90m lower than previously expected, in the range of £10-20m."

There has been no significant change to the current trading of the Group since these announcements were made.

Further information
A shareholder circular (the "Circular") containing the full terms and conditions of the Tender Offer and instructions to Qualifying Shareholders on how to tender their Ordinary Shares should they wish to do so, and convening the General Meeting, is expected to be published today. The Circular will be available on the Company's website at www.firstgroupplc.com/tenderoffer and copies of the Circular will also be submitted to the National Storage Mechanism and be available for inspection at www.morningstar.co.uk/nsm.

This summary should be read in conjunction with the full text of this announcement and the Circular.

Contacts at FirstGroup:
Faisal Tabbah, Head of Investor Relations
Stuart Butchers, Group Head of Communications
Tel: +44 (0) 20 7725 3354
corporate.comms@firstgroup.co.uk

Contacts at Brunswick PR:
Andrew Porter / Simone Selzer, Tel: +44 (0) 20 7404 5959

Advisers:
Goldman Sachs International
Eduard van Wyk, Bertie Whitehead, Anna Reynolds

J.P. Morgan Cazenove
Charles Harman, Richard Perelman, Poppy Barrett-Fish

Notes
¹ 'Adjusted net debt' excludes First Rail ring-fenced cash and IFRS 16 lease liabilities from net debt, as defined in the FY21 results.

Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR 6 Annex 1R: 2.2. This announcement contains inside information. The person responsible for arranging the release of this announcement on behalf of FirstGroup is David Isenegger, Group General Counsel and Company Secretary.

FirstGroup plc (LSE: FGP.L) is a leading private sector provider of public transport services. With £4.3 billion in revenue and around 30,000 employees, our UK divisions transported nearly 700,000 passengers a day in the 52 weeks to 27 March 2021. First Bus is the second largest regional bus operator in the UK, serving two-thirds of the UK’s 15 largest conurbations with a fleet of c.5,000 buses. First Rail is the UK’s largest rail operator, with many years of experience running long-distance, commuter, regional and sleeper rail services. We operate a fleet of c.3,750 rail vehicles on four contracted operations (Avanti, GWR, SWR, TPE) and two open access routes (Hull Trains and Lumo, our new East Coast service launching later in 2021). We create solutions that reduce complexity, making travel smoother and life easier. Our businesses are at the heart of our communities and the essential services we provide are critical to delivering wider economic, social and environmental goals. We are formally committed to operating a zero-emission First Bus fleet by 2035 and to cease purchasing further diesel buses after 2022; and First Rail will help support the UK Government’s goal to remove all diesel-only trains from service by 2040. Visit our website at www.firstgroupplc.com and follow us @firstgroupplc on Twitter.

FIRSTGROUP PLC
PROPOSED TENDER OFFER TO RETURN UP TO £500 MILLION TO SHAREHOLDERS

FirstGroup PLC (“FirstGroup” or the “Company”) announces the proposed return of up to £500 million to its shareholders (the “Shareholders”) by way of a tender offer.

1. BACKGROUND TO AND BENEFITS OF THE TENDER OFFER

Background to the Tender Offer

On 21 July 2021, FirstGroup completed the disposal of First Student and First Transit to EQT Infrastructure (the “Transaction”). As announced on 22 July 2021, the net disposal proceeds from the Transaction were $3,123 million (the “Net Disposal Proceeds”), an increase of $58 million over the base amount previously announced by the Company due to the final adjustments for working capital and debt and debt-like items as described in the circular in relation to the Transaction published by the Company on 10 May 2021 (the “Transaction Circular”). On the same date, FirstGroup announced its intention to increase the proposed return of value to £500 million (equivalent to approximately 41 pence per share at the time of announcement) from £365 million (the “Return of Value”). Such increase is due to the increase in Net Disposal Proceeds (as set out above), the increased clarity for First Rail resulting from agreement of South Western Railway and  TransPennine Express National Rail Contracts and final rail franchise termination sums, and a more positive cashflow outlook for the Group than had been previously anticipated.

As well as enabling the Return of Value, the Transaction allows the Group to make a £337 million contribution to the UK DB Pension Schemes (of which up to £117 million will be held in escrow and may be released back to the Group on conclusion of subsequent triennial valuations from 2024 onwards, depending on scheme performance) and to address other longstanding liabilities including those relating to the Greyhound business (“Greyhound”)) while ensuring the business is appropriately capitalised to continue investing for the future.

Following consultation with Shareholders, the Board has decided that the appropriate first step is to conduct the Return of Value by way of a Tender Offer. Shareholders are therefore being invited to tender some or all of their Ordinary Shares for purchase on the terms and subject to the Conditions set out in the Circular. 

Shareholders may decide not to participate fully or partially in the Tender Offer for a number of reasons, including their view of the potential for the value of the Company to increase in the future. If the full £500 million is not returned to Shareholders through the Tender Offer, the Board intends to undertake a second phase of the Return of Value to return any remaining surplus cash following completion of the Tender to Shareholders. This second phase of the Return of Value will be influenced by the size of any amount that has not been returned via the Tender Offer.  In such circumstances, if there is sufficient surplus, the Board intends to return approximately £50 million of it by way of a share buyback, with any meaningful surplus above this amount being returned by way of a Special Dividend (with accompanying Share Consolidation). The role of the Share Consolidation is to seek to ensure that the price per Ordinary Share remains materially unaffected by any Special Dividend, all other things being considered.

Why is FirstGroup pursuing the Tender Offer?

In line with the Company’s announcements of its intention to return up to £500 million of cash to Shareholders, the Board has considered the different ways of returning these funds, and has consulted with Shareholders on the different methods which are typically used to do so.  Following that consideration and consultation, the Board concluded that a Tender Offer made at an appropriate premium to the price per share of Ordinary Shares, is the best way to return a significant amount of capital to Shareholders in a short space of time, taking account of the relative costs, complexity and timeframes of the various possible methods, as well as the likely tax treatment for Shareholders. The Board recognises that the Tender Offer may not return the full £500 million so has set out a clear route to effectively return any amount not returned via the Tender Offer.

Benefits of the Tender Offer for Shareholders

The benefits of the Tender Offer for Shareholders as a whole are that:

• it is available to all Qualifying Shareholders regardless of the size of their holdings;
• it means Qualifying Shareholders who participate will receive, for Ordinary Shares successfully tendered, a Tender Price that represents a premium of 12.4 per cent. to the closing price of 93.4 pence per Ordinary Share on the Latest Practicable Date (being 25 October 2021) and a premium of 16.9 per cent. to the volume weighted average price per Ordinary Share over the one month to the Latest Practicable Date;
• it provides Qualifying Shareholders who wish to reduce their holdings of Ordinary Shares with an opportunity to do so at a market-driven price with an appropriate premium; and
• it permits Shareholders who wish to retain their current investment in FirstGroup and their Ordinary Shares to do so and no Shareholder is required to participate in the Tender Offer.

The Tender Offer will reduce the number of Ordinary Shares in issue, and so should, assuming earnings stay the same, have a positive impact on the Group’s earnings per share (as the Company intends to cancel all of the Ordinary Shares acquired in connection with the Tender Offer). 

Coast Capital Management currently controls, in aggregate, 156,749,809 Ordinary Shares, representing approximately 12.82 per cent. of the Issued Ordinary Share Capital as at the Latest Practicable Date. Coast Capital Management intends to participate in the Tender Offer in full, and has irrevocably undertaken to vote in favour of the Resolutions and to tender, in aggregate, 156,749,809 Ordinary Shares under the Tender Offer at the Tender Price. Further details of this irrevocable undertaking are set out in the Circular.

General Meeting to approve the Tender Offer and the potential further phase of the Return of Value

The Tender Offer will require the approval of Shareholders at a general meeting of the Company, which will be held at Queen Elizabeth II Centre, Broad Sanctuary, Westminster, London, SW1P 3EE on 18 November 2021 at 11:00am.

There is no guarantee that the Tender Offer will return the full sum of £500 million to Qualifying Shareholders.  If the full £500 million is not returned through the Tender Offer, if there is sufficient surplus, the Board intends to return approximately £50 million of the surplus by way of a share buyback, with any meaningful surplus above this amount being returned by way of a special dividend (the “Special Dividend”) (with accompanying Share Consolidation). The Company is therefore also taking the opportunity at the General Meeting to consider certain matters in addition to the Tender Offer Resolution which would require Shareholder approval if, to complete the Return of Value, the New Buyback Authority were to be used or a Special Dividend were to be paid, including:

• a resolution authorising the Company to purchase up to a maximum of 122,281,244 Ordinary Shares, representing approximately 10 per cent. of the Issued Ordinary Share Capital as at the Latest Practicable Date, which would be used to return to Shareholders approximately £50 million of the Net Disposal Proceeds not returned through the Tender Offer (the “New Buyback Authority”). This New Buyback Authority would replace the Existing Buyback Authority which was approved at the Company’s AGM on 13 September 2021; and
• a resolution authorising the Board to effect a consolidation and sub-division of the Company’s share capital (the “Share Consolidation”), which may be appropriate if a Special Dividend is paid to ensure that the market price per New Ordinary Share immediately after the payment of the Special Dividend would be approximately equal to the market price per Ordinary Share immediately before such payment.

By requesting these authorities now, the Board is seeking to ensure that the Company will be able to act quickly and without the delay and cost of convening a further general meeting if the Board does subsequently decide to return a portion of the £500 million not returned by the Tender Offer by way of a repurchase of Ordinary Shares and, if applicable, payment of a Special Dividend (with accompanying Share Consolidation). Further information about the New Buyback Authority and the Share Consolidation is set out in the Circular.

It is noted that there is no guarantee that, if the full £500 million is not returned through the Tender Offer, any repurchase of Ordinary Shares or Special Dividend for any surplus not returned will be paid, as such matters will be subject to the determination of the Board at the relevant time, including an assessment of prevailing equity market conditions, the capital needs of the Group, the sufficiency of distributable reserves and other factors, and the Board reserves the right to pursue alternative uses of the available funds, including for alternative share buybacks or dividends, or investment purposes.

2. THE TENDER OFFER

Overview of the Tender Offer

It is proposed that up to 476,190,476 Ordinary Shares (representing approximately 38.9 per cent. of the Issued Ordinary Share Capital as at the Latest Practicable Date) be purchased under the Tender Offer, for a maximum aggregate cash consideration of £500 million.

Full details of the Tender Offer, including the terms and conditions on which it is made, are set out in Part IV (Details of the Tender Offer) of the Circular and in the Tender Form. Shareholders do not have to tender any Ordinary Shares.

All Qualifying Shareholders who are on the Register at 6.00 p.m. on 29 November 2021 are entitled, but not required, to tender some or all of their Ordinary Shares for purchase by Goldman Sachs, acting as principal, pursuant to the requirements set out in the Circular. 

Tenders will only be accepted at the Tender Price. The Tender Price represents a premium of 12.4 per cent. to the closing price of 93.4 pence per Ordinary Share on the Latest Practicable Date and represents a premium of 16.9 per cent. to the volume weighted average price per Ordinary Share over the one month to the Latest Practicable Date.

Subject to satisfaction of the Conditions to the Tender Offer, Ordinary Shares which are successfully tendered under the Tender Offer will be purchased at a price of 105 pence per Ordinary Share.

The Issued Ordinary Share Capital on the Latest Practicable Date was 1,222,969,677. If the Tender Offer is implemented in full, this will result in the purchase of 476,190,476 Ordinary Shares (representing approximately 38.9 per cent. of the Issued Ordinary Share Capital of FirstGroup on the Latest Practicable Date). The Issued Ordinary Share Capital of FirstGroup following the cancellation of the Ordinary Shares (after FirstGroup has acquired all validly tendered and purchased Ordinary Shares from Goldman Sachs) will be 746,621,972, assuming no further options are exercised for newly issued shares in the interim. Shareholders should note that the Issued Ordinary Share Capital numbers referred to in this paragraph take no account of any further dilution which may be caused by the Share Plans, which is explained in further detail in the Circular.

The Tender Offer is to be effected by Goldman Sachs (acting as principal and not as agent, nominee or trustee) purchasing Ordinary Shares from Shareholders. Goldman Sachs, in turn, has the right to require the Company to purchase from it, and can be required by the Company to sell to it, such Ordinary Shares at the Tender Price under an option agreement (the “Option Agreement”), details of which are set out in the Circular.  All Ordinary Shares purchased by the Company from Goldman Sachs pursuant to the Option Agreement will be cancelled.

Options available to Shareholders in respect of the Tender Offer

Qualifying Shareholders are not obliged to tender any Ordinary Shares if they do not wish to do so.  If no action is taken by Qualifying Shareholders, there will be no change to the number of Ordinary Shares that they hold and they will receive no cash as a result of the Tender Offer.

Each Qualifying Shareholder who wishes to participate in the Tender Offer is entitled to submit a tender to sell some or all of their Ordinary Shares.

The total number of Ordinary Shares tendered by any Qualifying Shareholder should not exceed the total number of Ordinary Shares registered in the name of that Qualifying Shareholder at the Record Date.  For example, a Qualifying Shareholder may decide to tender 50 per cent. of their Ordinary Shares, but if a Qualifying Shareholder returned a tender purporting to offer for sale more than 100 per cent. of their Ordinary Shares, they would be deemed to have tendered only the number of Ordinary Shares actually owned by that Shareholder on the Record Date, with the tender in respect of any additional shares being deemed invalid.

Once made, any tender of Ordinary Shares will be irrevocable.

The Tender Offer will open on 28 October 2021 (unless such date is altered by the Company in accordance with the Tender Offer). The Tender Offer will close at 1.00 p.m. on 29 November 2021 and tenders received after that time will not be accepted (unless the Closing Date is extended by the Company in accordance with the Tender Offer). 

Shareholders should note that the Tender Offer is conditional on, among other things, the passing at the General Meeting of the Tender Offer Resolution as set out in the Notice of General Meeting. 

Number of Ordinary Shares that will be purchased pursuant to the Tender Offer      

All Shareholders who tender Ordinary Shares will receive the Tender Price, subject, where applicable, to the scaling-down arrangements set out in the Circular.  Accordingly, where scaling-down applies there is no guarantee that all of the Ordinary Shares which are tendered by Qualifying Shareholders will be accepted for purchase.

If more than 476,190,476 Ordinary Shares are validly tendered by Shareholders, acceptances of validly tendered Ordinary Shares will be scaled-down to determine the extent to which individual tenders are accepted. 

These scaling-down arrangements are set out in full in the Circular and should be read in full.

Guaranteed Entitlement

The Guaranteed Entitlement is only relevant if the Tender Offer is oversubscribed. Tenders in respect of approximately 38.9 per cent. of each holding of Ordinary Shares of every Qualifying Shareholder on the Record Date will be accepted in full at the Tender Price and will not be scaled down. This percentage is known as the “Guaranteed Entitlement”. Qualifying Shareholders may tender Ordinary Shares in excess of their Guaranteed Entitlement. However, if the Tender Offer is oversubscribed, the tender of such excess Ordinary Shares will only be successful to the extent that other Shareholders have tendered less than their Guaranteed Entitlement.

These Guaranteed Entitlement arrangements are set out in full in the Circular and should be read in full.

Circumstances in which the Tender Offer may not proceed

There is no guarantee that the Tender Offer will take place.  The Tender Offer is conditional on the passing of the Tender Offer Resolution set out in the Notice of General Meeting.  The Tender Offer is also conditional on other matters, including:

• receipt of valid tenders in respect of at least 12,228,124 Ordinary Shares (representing approximately 1 per cent. of the Issued Ordinary Share Capital as at the Latest Practicable Date) by 1.00 p.m. on the Closing Date and there continuing to be valid tenders in respect of at least such number of Ordinary Shares; and
• the Tender Offer not having been terminated in accordance with its terms and the Company having confirmed to Goldman Sachs that it will not exercise its right to require Goldman Sachs not to proceed with the Tender Offer.

The Board has reserved the right, at any time prior to the Tender Offer becoming unconditional, to require Goldman Sachs not to proceed with the Tender Offer if the Board concludes that the implementation of the Tender Offer is no longer in the best interests of the Company and/or Shareholders as a whole. The Board has also reserved the right, at any time prior to the announcement of the results of the Tender Offer, with the prior consent of Goldman Sachs, to revise the aggregate value of the Tender Offer, or to extend the period during which the Tender Offer is open, based on market conditions and/or other factors, subject to compliance with applicable legal and regulatory requirements.

If the Tender Offer does not occur, the Group will have on its balance sheet the £500 million of cash that is proposed to be returned pursuant to the Return of Value. Holding this amount of cash means that the Group is likely to receive a reduced return on capital while the Board considers how best to deploy or return these funds to Shareholders.  The Board is of the opinion that, subject to any value-creating alternatives, this cash is surplus to the requirements of the Group and that it would be in the best interests of the Company and Shareholders as a whole not to retain this cash on the Group’s balance sheet but to return it to Shareholders by other means, such as a special dividend, for example. 

Results announcement and Unconditional Date

As set out in the timetable below, it is expected that the results of the Tender Offer will be announced on 2 December 2021, at which time the Tender Offer is expected to become unconditional subject to the Conditions described in the Circular having been satisfied. Until such time as the Tender Offer becomes unconditional, the Tender Offer will be subject to the Conditions described in the Circular. Settlement is then expected to take place as set out in the timetable below.

Full terms and conditions of the Tender Offer

Full details of the Tender Offer, including the terms and conditions on which it is made and some questions and answers related to the Return of Value are set out in the Circular.

3. EXPECTED TIMETABLE

Each of the times and dates in the table set out above is indicative only and may be subject to change by FirstGroup, in which event details of the new times and dates will be notified to Shareholders by announcement through a Regulatory Information Service.

All references to times in the timetable above are to London times.

4. DIVIDENDS

It is not expected that the Tender Offer will have any impact on FirstGroup’s intention in respect of dividends as stated in the financial policy framework set out in the Transaction Circular and in the results announcement of 27 July 2021, which is to commence payment of a regular dividend during the financial year ending March 2023. The Group is targeting the annual dividend amount to be around three times covered by a new Rail-adjusted Profit After Tax measure, assuming normalisation of trading conditions post-pandemic.

In addition to the Return of Value, the Board reiterates its commitment to keeping the balance sheet position of the ongoing Group under review and will consider the prospects for making further additional distributions to Shareholders in due course, following crystallisation of the First Transit Earnout (as defined in the Transaction Circular and fair valued in the Group’s recent full year results at $140 million for accounting purposes), realisation of value from the sale of the properties retained and consideration deferred in the recent sale of Greyhound Lines Inc. to FlixMobility GmbH, and the potential release of monies from pension escrow (of up to £117 million). The Board also notes the capacity to increase gearing over time, as end market conditions and hence business performance improves.

5. IRREVOCABLE UNDERTAKING

The Company has received an irrevocable undertaking from Coast Capital Management, in its capacity as a controller of Ordinary Shares in the Company and, as such, a major shareholder in the Company, to support the Tender Offer. Pursuant to that irrevocable undertaking Coast Capital Management has committed to validly tender, or to procure the valid tender of, 156,749,809 Ordinary Shares (representing approximately 12.82 per cent of the total issued share capital of the Company) in accordance with the procedure specified in the Circular. The Ordinary Shares which are the subject of the undertaking will be tendered as soon as possible and in any event within ten days of the publication of the Circular. Coast Capital Management has also undertaken to vote in favour of the Resolutions and not to sell, or otherwise dispose of, the Ordinary Shares which are the subject of the undertaking or to acquire any additional Ordinary Shares or interest in the Company.

6. TAKEOVER CODE

Rule 9 of the Takeover Code applies to any person who acquires an interest in shares which, when taken together with shares in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code. Any such person is required to make a general offer to all shareholders of that company to acquire their shares in cash at not less than the highest price paid by such person, or by any person acting in concert with him, for any interest in shares within the 12 months prior to the offer. Such an offer under Rule 9 of the Takeover Code must also be made where any person who, together with persons acting in concert with him, holds not less than 30 per cent. but not more than 50 per cent. of the voting rights in the company and such person, or any person acting in concert with him, acquires an interest in any other shares which increase the percentage of shares carrying voting rights in which he is interested.

When a company purchases its own voting shares, any resulting increase in the percentage of voting rights held by a shareholder, or group of shareholders acting in concert, will be treated as an acquisition for the purpose of Rule 9.

Goldman Sachs may purchase, as principal and not as agent, nominee or trustee, Ordinary Shares under the Tender Offer, which could result in Goldman Sachs owning 30 per cent. or more of the Issued Ordinary Share Capital. It is also possible that entities within the group of which Goldman Sachs is part hold or come to hold other interests in the Issued Ordinary Share Capital and that, in certain cases, those interests could be subject to aggregation with any Ordinary Shares acquired under the Tender Offer for the purposes of Rule 9 of the Takeover Code.  As such, it is possible that the aggregated holdings of Goldman Sachs and persons in concert with it could result in a requirement to make a general offer under Rule 9.

Goldman Sachs has indicated its intention that, shortly after the purchase of Ordinary Shares under the Tender Offer, it will sell all those Ordinary Shares to the Company for cancellation. Accordingly, a waiver has been obtained from the Panel on Takeovers and Mergers in respect of the application of Rule 9 to the purchase by Goldman Sachs of Ordinary Shares under the Tender Offer.

7. FINANCIAL ADVICE

The Board has received financial advice from Goldman Sachs and J.P. Morgan in relation to the Return of Value.  In providing their financial advice, Goldman Sachs and J.P. Morgan have relied upon the Board’s commercial assessments of the Return of Value. 

8. RECOMMENDATION

The Board considers the Return of Value and the Resolutions to be in the best interests of Shareholders as a whole.  Accordingly, the Board recommends that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, as the Directors intend to do for their respective individual beneficial holdings of, in aggregate, 751,483 Ordinary Shares, representing approximately 0.06 per cent. of the Issued Ordinary Share Capital as at the Latest Practicable Date.

The Board makes no recommendation to Shareholders in relation to participation in the Tender Offer itself.  Whether or not Shareholders decide to tender all or any of their Ordinary Shares will depend on, among other things, their view of FirstGroup’s prospects and their own individual circumstances, including their tax position.  Shareholders need to take their own decision and are recommended to consult their duly authorised independent advisers.

9. DIRECTORS’ INTENTIONS

Each of the Directors has confirmed that they do not intend to tender through the Tender Offer any of their current individual beneficial holding of Ordinary Shares.

DEFINITIONS

The following definitions apply throughout this announcement unless the context requires otherwise:

IMPORTANT STATEMENT

This announcement does not constitute or form part of an offer or invitation, or a solicitation of any offer or invitation, to purchase any Ordinary Shares or other securities.

The full terms and conditions of the Tender Offer will be set out in the Circular, which Shareholders are advised to read in full. Any response to the Tender Offer should be made only on the basis of the information in the Circular.

J.P. Morgan Securities plc (which conducts its U.K. investment banking activities as J.P. Morgan Cazenove) (“J.P. Morgan”), which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting as lead joint sponsor, joint financial adviser and joint corporate broker exclusively for FirstGroup and for no one else in connection with the Return of Value and will not be responsible to anyone other than FirstGroup for providing the protections afforded to clients of J.P. Morgan or for providing advice in relation to the matters described in this announcement.

Goldman Sachs International (“Goldman Sachs”), which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting as joint sponsor, joint financial adviser and joint corporate broker exclusively for FirstGroup and for no one else in connection with the Return of Value and will not be responsible to anyone other than FirstGroup for providing the protections afforded to clients of Goldman Sachs or for providing advice in relation to the matters described in this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed on J.P. Morgan and Goldman Sachs (the "Financial Advisers") under FSMA or the regulatory regime established thereunder: (i) neither of the Financial Advisers or any persons associated or affiliated with either of them accepts any responsibility whatsoever or makes any warranty or representation, express or implied, in relation to the contents of this announcement, including its accuracy, completeness or verification or for any other statement made or purported to be made by, or on behalf of it, FirstGroup or the Directors, in connection with FirstGroup and/or the Tender Offer; and (ii) each of the Financial Advisers accordingly disclaims, to the fullest extent permitted by law, all and any liability whatsoever, whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise be found to have in respect of this announcement or any such statement.

Cautionary statement regarding forward-looking statements

This announcement includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms anticipates, believes, could, estimates, expects, intends, may, plans, projects, should or will, or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements may, and often do, differ materially from actual results. Any forward-looking statements in this announcement reflect FirstGroup’s current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group and its operations, results of operations and growth strategy. Other than in accordance with its legal or regulatory obligations (including under the Listing Rules, the Disclosure Guidance and Transparency Rules, the Market Abuse Regulation and the rules of the London Stock Exchange), FirstGroup is not under any obligation and FirstGroup expressly disclaims any intention or obligation (to the maximum extent permitted by law) to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overseas Shareholders

The availability of the Tender Offer to Shareholders who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdiction in which they are located. Shareholders who are not resident in the United Kingdom should read paragraph 6 of Part IV (Details of the Tender Offer) of the Circular and should inform themselves about, and observe, any applicable legal or regulatory requirements.  In addition, the attention of Shareholders who are resident in the United States is drawn to the section for US Shareholders below.

The Tender Offer is not being made, directly or indirectly, in or into, or by use of the mails of, or by any means or instrumentality (including, without limitation, facsimile transmission, telex, telephone and e-mail) of interstate or foreign commerce of, or any facilities of a national securities exchange of, any Restricted Jurisdiction and the Tender Offer cannot be accepted by any such use, means, instrumentality or facility or from within any Restricted Jurisdiction. Accordingly, unless otherwise determined by the Company and permitted by applicable law and regulation, neither the Circular nor the Tender Form nor any related document is being, nor may it be, directly or indirectly, mailed, transmitted or otherwise forwarded, distributed, or sent in, into or from any Restricted Jurisdiction, and persons receiving the Circular, the Tender Form and/or any related document (including, without limitation, trustees, nominees or custodians) must not mail or otherwise forward, distribute or send it in, into or from such Restricted Jurisdiction, as to do so may invalidate any purported acceptance of the Tender Offer. Any person (including, without limitation, trustees, nominees or custodians) who would or otherwise intends to, or who may have a contractual or legal obligation to, forward the Circular, the Tender Form and/or any related document to any jurisdiction outside the United Kingdom, should seek appropriate advice before taking any action.

U.S. Shareholders

The Tender Offer is not subject to the disclosure and other procedural requirements of Rule 13e-4 or Regulation 14D under the US Securities Exchange Act of 1934 (the “US Exchange Act”). The Tender Offer will be made in the US in accordance with the requirements of Regulation 14E under the US Exchange Act to the extent applicable. Certain provisions of Regulation 14E under the US Exchange Act are not applicable to the Tender Offer by virtue of Rule 14d-1(d) under the US Exchange Act. Goldman Sachs will act as US dealer manager with respect to the Tender Offer in the United States to the extent required. US Shareholders should note that the Ordinary Shares are not listed on a US securities exchange and the Company is not subject to the periodic reporting requirements of the US Exchange Act and is not required to, and does not, file any reports with the US Securities and Exchange Commission thereunder.

It may be difficult for US Shareholders to enforce certain rights and claims arising in connection with the Tender Offer under US federal securities laws since the Company is located outside the US and most of its officers and directors may reside outside the US. It may not be possible to sue a non-US company or its officers or directors in a non-US court for violations of US federal securities laws. It also may not be possible to compel a non-US company or its affiliates to subject themselves to a US court’s judgment.

The receipt of cash pursuant to the Tender Offer by a Shareholder who is a US person will be a taxable transaction for US federal income tax purposes. The Circular sets out a guide to certain US tax consequences of the Tender Offer for Shareholders under current US law. However, each such Shareholder should consult and seek individual advice from an appropriate professional adviser.

To the extent permitted by applicable law and in accordance with normal UK practice, the Company, Goldman Sachs or any of their respective affiliates, may make certain purchases of, or arrangements to purchase, Ordinary Shares outside the United States during the period in which the Tender Offer remains open for participation, including sales and purchases of Ordinary Shares effected by Goldman Sachs acting as market maker in the Ordinary Shares.  These purchases, or other arrangements, may occur outside the United States either in the open market at prevailing prices or in private transactions at negotiated prices. In order to be excepted from the requirements of Rule 14e-5 under the US Exchange Act by virtue of Rule 14e-5(b)(12) thereunder, such purchases, or arrangements to purchase, must comply with applicable English law and regulation, including the Listing Rules, and the relevant provisions of the US Exchange Act.  Any information about such purchases will be disclosed as required in the UK and the US and, if required, will be reported via a Regulatory Information Service and will be available on the London Stock Exchange website at http://www.londonstockexchange.com.

While the Tender Offer is being made available to Shareholders in the US, the right to tender Ordinary Shares is not being made available in any jurisdiction in the US in which the making of the Tender Offer or the right to tender such Ordinary Shares would not be in compliance with the laws of such jurisdiction.

This announcement has not been approved, disapproved or otherwise recommended by the US Securities and Exchange Commission or any US state securities commission and such authorities have not confirmed the accuracy or determined the adequacy of this announcement. Any representation to the contrary is a criminal offence in the US.