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US private equity muscles in on rail

16 April 2018

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American private equity firm Apollo Management has made a bid for one of Britain’s largest bus and rail companies, First Group, which has rebuffed the initial bid. The private equity firm has until 9 May to make a formal offer. 

Apollo has no prior experience of running a rail franchise and is seen as a major buyout firm. First Group controls Britain’s third and fourth largest rail franchises by ticket revenue, running South Western Railway from London Waterloo and the Great Western Railway via London Paddington.

There is a history of foreign buyouts of Britain’s transport companies, but if Apollo were to succeed in its venture, it would also mean a major operator would end up in the hands of a company better known for asset stripping than transport. At present, just six out of 18 firms eligible to bid for control of UK rail franchises are British companies.

The government – if it is going to be truly a Brexit government concerned with protecting and developing British assets – must show it is willing to intervene to stop the takeover of British business. So far, it has been more interested in appeasing multinational corporations.

For its part, First Group has been spending too much time and effort in acquiring foreign companies itself, including the Greyhound bus network in the US and Canada and rail operations in Sweden and Denmark – making itself more of a target for US private equity.