Go-Ahead Group, which manages the franchise of Southern Rail, Thameslink and buses, is considering offers from two participants, making it the newest British transport company to become a possible takeover target.
The group, a leading bus service provider in London and across the country and which operates the UK’s largest rail network, Govia Thameslink Railway, said it had received unsolicited possible offers from the Kelsian Group and a consortium of Kinetic and Globalvia Inversiones.
Go-Ahead said both conditional offers were “at a level that, if a firm offer is made, the board will intend to recommend to shareholders”.
Shares of Go-Ahead jumped 20% on Monday morning after the announcement, reaching its highest level since the start of the 2020 pandemic.
Kelsian is an Australian transport provider registered in Sydney, where Go-Ahead had previous contracts to upgrade the railway system. Kinetic, which operates buses in Melbourne, and auction partner Globalvia Inversiones are largely owned by Canadian pension fund OP Trusts.
Go-Ahead also has contracts to manage rail and bus services in Ireland, Singapore, Norway and Germany.
The news comes after a tumultuous year for Go-Ahead, in which she was embroiled in an accounting scandal with the discovery that she had wrongfully withheld more than £ 50 million from the government during her southeast rail franchise.
He was stripped of his contract, and trading in Go-Ahead shares on the London Stock Exchange was suspended in January after failing to file accounts pending a new audit. However, he has since won an additional three-year contract to manage the Thameslink, Gatwick Express, Southern and Great Northern services.
Competitive transport operators in the UK have also targeted takeovers, with FirstGroup rejecting an offer from I Squared Capital last week and Stagecoach accepting an offer from DWS Infrastructure in March, which previously looked like it would merge with National Express.
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The value of transport companies fell when the coronavirus struck in March 2020 and the government advised the public to avoid all unnecessary travel. Go-Ahead’s share price fell by about 70% in a month at the start of the pandemic as the UK’s rail franchise system was phased out.
Since then, the number of passengers has recovered to only about 80% of the 2019 levels on buses and trains. However, stable, albeit lower, profit margins are guaranteed by the new railway contracts in the UK, leading to renewed investor interest.
Operating companies have been told to find cost savings, but their revenues will not be affected by what is likely to be a summer of strikes. Widespread industrial action is set to begin next week.
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