Activist investor Coast Capital Management has called for a shareholder meeting at travel operator FirstGroup (FGP) to replace a majority of its board.
The New York-based hedge fund, which holds 9.8% of FirstGroup’s shares, is following through on its threat six months ago to attempt a boardroom coup and proposes removing six of the current 11 directors, appointing seven of its own candidates in their place.
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To succeed, Coast Capital needs more than 50% of voting shareholders to back its plan. So far market reaction to the news has been fairly muted with FirstGroup’s shares trading sideways at 116p.
This isn't the first time the travel firm’s board has been under attack, with Coast Capital previously calling for a reshuffle after continuing poor performance in the company’s rail division.
FIRSTGROUP DEFENDS ITSELF
FirstGroup defended itself in a statement, arguing that the board is ‘focused on delivering shareholder value’ and that it has 'the right team with the right experience and plans in place to do so.’
It added that the board ‘regularly reviews its composition to ensure it maintains an appropriate balance of skills and expertise, and new board members have been added as recently as earlier this month.’
The company’s chairman Wolfhart Hauser said in July it was exploring ways to add shareholder value, and began withdrawing its Greyhound coach service in western Canada - where it had significantly over-estimated cash flows - to address long-standing issues in that part of the business.
However, it seems that Coast Capital has lost patience with FirstGroup’s board and reportedly wants the removal of Hauser and recently-installed CEO Matthew Gregory.
FirstGroup operates trains and buses in the UK and North America, including the Great Western and Western railway franchises.
BIG LOSSES
While its Great Western and South Western operations appear to be chugging along nicely, the company’s TransPennine Express rail franchise has struggled to meet passenger growth targets and a loss of up to £106.3m is forecast for the rest of the contract which lasts until 2023.
Former chief executive Tim O’Toole was sacked in dramatic fashion last May after the company recorded a huge pre-tax loss of £327m. In the 12 months prior to that, the firm had reported a £152.6m pre-tax profit.
Management are pinning part of their recovery hopes on better profit margins at the US and UK bus operations, with the largest division, American school bus service First Student, performing particularly well.
