FirstGroup has announced the acquisition of RATP Dev Transit London, along with its subsidiaries, for an enterprise value of £90 million. This transaction will see FirstGroup take over a business underpinned by approximately £100 million in physical assets, which includes around £50 million in freehold property.
The financing of this acquisition will be managed through £45 million from FirstGroup’s existing cash reserves, coupled with the assumption of asset-backed vehicle finance leases from RATP London, valued at about £45 million.
The company anticipates that the acquisition will not significantly affect earnings in the fiscal years 2025 and 2026, projecting the transaction to be broadly earnings neutral. Looking ahead over the next five years, as the route contract portfolio evolves, FirstGroup expects annual revenues to increase to between £300 million and £350 million.
The anticipated operating margins are forecasted to align with the historical averages for London, which stand at approximately 6% to 7%.
In terms of cash flow, FirstGroup is preparing for operating cash outflows in the vicinity of £30 million during the first two years post-acquisition. These outflows account for bus operating lease payments and capital expenditures. However, the business is projected to become operating cash positive starting from the fiscal year 2027.
The completion of this acquisition is slated for the first half of 2025, marking a significant expansion for FirstGroup in the London transportation market.
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