THE internal battle in FirstGroup, which operates Great Western Railway, South Western Railway and TransPennine Express, is becoming a war of words between the board and what it sees as a rogue investor.
Ahead of an Extraordinary General Meeting later this month, First has launched a determined counter attack on US-based Coast Capital, which has a near-10 per cent stake and wants First’s chairman, chief executive and six of the eleven directors to be removed.
Coast claims that the board is responsible for First’s current woes, and has a ‘track record of value destruction and under-performance’.
In response, First is urging its shareholders to vote against Coast’s plan to change the board at the EGM on 25 June, saying: ‘Based on its many interactions with Coast Capital to date and its claims and proposals, the board believes that Coast Capital is an opportunistic, self-interested player that is only focused on short-term gains.’
The dispute has blown up against a background of uncertainty and falling share prices. First wants to ‘separate’ its UK Bus Division, possibly by selling it, and at least one of its rail franchises is known to be in trouble.
First launched a bid to renegotiate the South Western Railway contract last November, warning that a clause in the franchise which relates premiums and subsidies to London employment rates is not producing an equal balance of risk between the franchise holder and the Department for Transport. At the time, First said: ‘There is uncertainty regarding the outcomes of this mechanism over the remaining franchise term, which has the potential to significantly impact the profitability of the franchise. We are reviewing the effectiveness of this mechanism.’
South Western, which was genuinely profitable under its former owner Stagecoach, has also been hit by repeated industrial action. The RMT has just announced another five consecutive 24-hour strikes for later this month, in its long-running dispute over on-train staffing and the future role of conductors.
First has signalled that its attention is turning to its profitable US bus businesses First Student and First Transit, which seem to be offering better results than either trains or buses in Britain.
Meanwhile, the skirmishes at board level have been continuing. In a new statement, Coast Capital said it ’strongly disagrees’ with First’s allegations that it is only concerned with short-term gains.
First, however, is continuing to fight back by criticising Coast’s ‘scatter-gun, inconsistent and unusual proposals’. It is also unhappy that one of Coast’s board nominees is Steve Norris, quoting his lack of experience running a company on a similar scale to First and his track record as chairman of Jarvis, which collapsed in 2010.
First added: ‘Coast Capital seems more focused on rekindling the past than preparing for the future.’