Scottish bus company to buy one of city’s biggest operators

It is the latest in a series of acquisitions announced by the Scottish bus company. The RATP business has a market share of around 12% and is described by FirstGroup as “one of the principal bus operators in the capital”.

FirstGroup shares were up nearly 4% at 160p in early trading in the wake of its announcement of the deal.

Graham Sutherland, FirstGroup chief executive, 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.”

The RATP London operation has around 3,700 employees, more than four-fifths of them drivers.

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FirstGroup told the stock market this morning: “The acquisition will see the group enter the London bus market with a strong position and will further grow and diversify the group’s revenue.”

The RATP London operation has 10 depots across central and west London, with four owned and six leased, and a fleet of around 1,000 buses, of which one-third are fully electric.

It has around 90 Transport for London (TfL) route contracts, typically of seven-year duration.

FirstGroup noted the weighted average remaining contract life of these agreements is 3.3 years.

The RATP London operation had revenues of £271m for the year ended December 31, 2023.

FirstGroup declared the business being acquired has “an experienced management team with a proven track record of developing and implementing a comprehensive turnaround plan that includes enhanced bid discipline and improved operational and cost performance”.

FirstGroup said the enterprise value of the RATP London operation is “underpinned by [around] £100m of physical assets including freehold property of [around] £50m”.

It revealed the acquisition would be financed with £45m from the group’s existing cash reserves and the assumption of RATP London’s asset-backed vehicle finance leases, which amount to around £45m.

FirstGroup said the acquisition is subject to French government approval, and is conditional on TfL consent to the change of control.

Mr Sutherland said: “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.”