A major British transport company has reached an agreement to sell its North American school bus business for $608 million, marking a significant step in its strategic plan to reduce debt and refocus on core operations after a challenging financial period.
Deal Structure and Financial Impact
The transaction, announced Thursday, will see the British transport operator divest its entire North American student transportation division, which operates across the United States and Canada. The sale price of $608 million (approximately £488 million) represents a significant asset disposal for the company.
According to Mobico, the deal will generate net proceeds of approximately $456 million after accounting for tax and various transaction costs. The company intends to use these funds primarily to reduce its substantial debt burden, which has been a pressing concern for investors.
The transaction is expected to close in the third quarter of 2024, subject to standard regulatory approvals and customary closing conditions. The company noted that the sale price represents a multiple of approximately 7.4 times the division’s 2023 adjusted operating profit.
“This sale delivers an attractive valuation and marks a significant step in our plans to refocus the group and strengthen our balance sheet,” said Mobico’s Chief Executive Officer in the announcement.
Strategic Repositioning Efforts
The divestiture represents a crucial component of Mobico’s broader strategic reset following a challenging period. The company, which rebranded from National Express Group last year, has been working to stabilize its financial position after issuing multiple profit warnings in 2023.
In March, the transport operator detailed a comprehensive plan to strengthen its balance sheet, which included potential disposals of non-core assets. The North American school bus business, while profitable, had been identified as a division that could be sold to generate significant capital.
Following this transaction, Mobico will concentrate more intensely on its remaining operations, which include urban bus services in the UK, coach operations in Europe, and various transit contracts in several international markets.
The company emphasized that this strategic refocusing will allow management to direct resources toward operations with the greatest growth potential and operational synergies.
Buyer Background and Plans
The purchaser, EQT Infrastructure, is part of the global investment organization EQT, which manages approximately €232 billion in assets across various investment strategies. The firm has significant experience in the transportation and infrastructure sectors.
EQT Infrastructure indicated that it sees substantial growth potential in the North American school transportation market and plans to invest in the business’s continued expansion. The school bus operation currently transports approximately 800,000 students daily through contracts with school districts across the United States and Canada.
“We are excited to acquire this well-established business and see significant opportunities to enhance its service offering and operational efficiency,” stated a representative from EQT Infrastructure.
The investment firm noted that it intends to maintain the existing management team and operational structure while providing additional capital for fleet modernization and potential targeted acquisitions.
Market Reaction and Analyst Perspective
Financial markets responded positively to the announcement, with Mobico’s shares rising approximately 4% in London trading following the news. The stock movement reflected investor relief at the progress in the company’s debt reduction strategy.
Analysts generally viewed the transaction favorably, noting that the valuation exceeded some market expectations. Several financial analysts highlighted that the sale represents an important milestone in the company’s recovery plan.
“This disposal delivers a better-than-expected price and significantly accelerates Mobico’s debt reduction timeline,” commented one transport sector analyst from a leading investment bank. “It demonstrates management’s commitment to the restructuring plan outlined earlier this year.”
Industry observers also noted that the transaction occurs at a time when infrastructure investors are showing increased interest in stable, contract-based businesses with essential service characteristics – a profile that fits the school transportation operation well.
With this major divestiture now agreed upon, market attention will likely shift to Mobico’s operational performance in its remaining business divisions and its progress toward financial stability in the coming quarters.