FirstGroup plc has announced its agreement to acquire RATP Dev Transit London Limited and its subsidiaries from RATP Développement SA for an enterprise value of 90 million GBP.

This acquisition marks FirstGroup’s entry into the London bus market.

RATP Dev enroute in Central London
RATP Dev enroute in Central London

Highlights of the Acquisition

RATP Dev Transit London is a major player in the London bus market with approximately 12% market share, making this acquisition a substantial foothold for FirstGroup.

Operational Assets:

  • 10 depots: Four owned and six leased, located in Central and West London
  • A fleet of approximately 1,000 buses, one-third of which are fully electric
  • 90 Transport for London (TfL) route contracts, typically lasting seven years, with an average remaining life of 3.3 years

Workforce and Revenue:

  • A team of approximately 3,700 employees, including drivers, who make up over 80% of the workforce.
  • Reported revenues of 271 million GBP for the year ending 31 December 2023.

Asset Valuation:

The acquisition includes approximately 100 million GBP in physical assets, including 50 million GBP worth of freehold properties.

Turnaround Plan

RATP Dev Transit London’s management team has implemented a comprehensive turnaround strategy, leading to improved operational and cost performance.

The acquisition will be funded through 45 million GBP from FirstGroup’s existing cash reserves and 45 million GBP in assumed vehicle finance leases.

The group anticipates the acquisition will be broadly earnings-neutral in FY 2025 and FY 2026, with a gradual transition to positive cash flow by FY 2027.

Revenue is expected to grow to 300-350 million GBP annually within five years, with operating margins aligned to historical London norms of approximately 6-7%.

The acquisition is subject to French government approval, as RATP Dev is ultimately state-owned, and TfL consent to the change of control. Completion is expected in H1 2025.

Electrification

With a third of the fleet already electric, FirstGroup aims to accelerate the transition to a zero-emission fleet, aligning with TfL’s target of full-fleet electrification by 2034.

Planned investments include depot electrification, charging infrastructure, and battery replacements.

Graham Sutherland, FirstGroup’s Chief Executive Officer said:

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.

We look forward to continuing to build on our relationship with TfL and welcoming RATP London’s employees into the Group, to continue the transformation of the business and to capitalise on the growth potential in the London market.

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