On 13 June 2022, UK-listed transport company, The Go-Ahead group plc (Go-Ahead) announced that it had received separate unsolicited, competing approaches regarding possible cash offers for the company from Kelsian Group Limited (Kelsian) and a consortium consisting of Kinetic Holding Company Pty Ltd and Globalvia Inversiones S.A.U (the Consortium).
Go-Ahead revealed that it had received a series of revised proposals and despite the unsolicited nature of the approaches, the board gave both parties access to undertake due diligence and concluded that the most recent revised proposals it received from Australian-based Kelsian and the Australian-Spanish Consortium were both at a level which, should a firm offer be made, it would be minded to recommend to Go-Ahead shareholders.
Shortly after the announcement of the possible offers, the Consortium, which comprises Australian rival transport operator, Kinetic, and Spain-based Globalvia, which are both backed by Canadian international pension fund OPTrust, confirmed that it had reached agreement with Go-Ahead on the terms of a recommended £647.7m cash acquisition. Under the terms of the acquisition, Go-Ahead shareholders would be entitled to receive £14.50 in cash per share and a special dividend of 50 pence per share, amounting to £15 per Go-Ahead share and representing a 24% premium to Go-Ahead’s closing share price of £12.10 on 10 June 2022.
Following the announcements, shares in Go-Ahead surged 16.2% to £15.80, as investors reacted positively to the prospect that the competing offers could spark a bidding war for the UK’s largest double-decker bus operator and commuter rail network.
The news of the offer comes after a turbulent year for Go-Ahead following an accounting scandal which resulted in the company being fined £23.5m by the UK government and stripped of its Southeastern rail franchise after failing to declare £25m of taxpayer funding that it received from the government over the course of its Southeastern rail franchise but should have later been returned. Go-Ahead was forced to delay publication of its 2021 financial results by the 4 January 2022 deadline and the company’s shares were temporarily suspended from trading on the London Stock Exchange. The FRC is also conducting a probe into the audit of Go-Ahead’s accounts. However, things are looking up for the company which has since won a further three-year contract to operate Thameslink, Gatwick Express, Southern and Great Northern services. In an effort to improve investor confidence, Go-Ahead’s CEO, Christian Schreyer, has since overhauled its corporate governance and brought in a new management team.
UK-listed Go-Ahead is the latest company in the wider transport sector to be targeted since emerging from the financial disruptions caused by the global pandemic, which resulted in falling passenger numbers as people were instructed to avoid non-essential travel. Investors now appear to be betting on the recovery of the transport sector as the industry has seen a wave of takeover activity in recent months including the £594.9m offer by Stagecoach by DWS Infrastructure (which trumped a £481m competing offer by National Express) and the possible offer for FirstGroup pls by I Squared Capital Advisors (UK) LLP. The recent surge in takeover interest sparked investor speculation that other UK-listed transport companies would become takeover targets and following the statement made by FirstGroup on 26 May 2022 regarding the unsolicited approach from I Squared, the share price of Go-Ahead jumped 19.8%. The company also stated that the Consortium’s £650m offer represented a 48.5% premium to its undisturbed share price before First Group first announced its takeover interest.
Commenting on the Acquisition, Christian Schreyer, Go-Ahead’s Chief Executive, stated:
‘This is a compelling offer which combines an attractive valuation for shareholders with bright prospects for Go-Ahead's operations and colleagues around the world. We have confidence in Go-Ahead's future as an independent business, but see that being part of a truly global mass transit platform will yield exciting opportunities. We welcome the commitment of Kinetic and Globalvia to invest in the decarbonisation and digitalisation of our operations, and to support our strategy, The Next Billion Journeys.’
Michael Sewards, Co-CEO of Kinetic, responded:
‘We are delighted that the Board of Go-Ahead has unanimously recommended our offer to shareholders. As Australia and New Zealand's largest and fastest growing bus operator, with the majority of our revenue aligned to long-term government contracts, we will bring proven experience to accelerate the delivery of Go-Ahead's Next Billion Journeys growth strategy’
However, potential suitor Kelsian urged Go-Ahead shareholders to take no action in relation to the Consortium offer as Kelsian would still be considering a possible offer for the company which the company stated is likely to be an all-cash offer. Lobbying in favour of its own competing offer, Kelsian announced:
‘Kelsian believes that the potential combination with Go-Ahead would create an international leader in multi-modal, mass transit supporting a sustainability agenda for its passengers and governments, with strong growth prospects. Kelsian believes that, if an offer is made by Kelsian, it could bring to bear its expertise across safety, operational efficiency, digital, decarbonisation, and experience operating in the UK to enhance and accelerate the growth of Go-Ahead creating substantial value for Kelsian shareholders as well as benefiting wider stakeholders including passengers, governments and employees. Kelsian continues to carefully assess the opportunity with a disciplined focus on the strategic and financial rationale.’
Kelsian is required to announce whether or not it has a firm intention to make an offer for Go-Ahead by 11 July 2022. Market Tracker will continue to monitor these transactions as they develop.
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