Shares of FirstGroup (LSE:FGP) climbed 3% following the company’s announcement that it has acquired Tetley’s Motor Services Limited, a coach and bus operator headquartered in Leeds.
This deal adds 55 vehicles to FirstGroup’s existing fleet, as well as a sizeable depot located in central Leeds, right next to one of First Bus’s current facilities. Tetley’s Coaches reported an EBIT of £1.4 million on revenues of £5.3 million for the year ending March 31, 2024.
Tetley’s offers a variety of transport services, including routes for schools, universities, employee shuttles, and private hires across Leeds and West Yorkshire. Many of Tetley’s contracts have been recently renewed, lending added stability to its operations. Ian Tetley, Managing Director of Tetley’s Coaches, will stay on through the transition period as the company integrates with First Bus.
“We view FirstGroup’s series of bus bolt-on acquisitions favourably, so welcome another margin-accretive deal, which would further diversify Bus revenues. We think FirstGroup has generally paid lower transaction multiples than both our valuation, and also the market-implied valuation of Bus, meaning these bolt-ons are not reliant on potential synergies to be accretive,” commented analysts from RBC.
This acquisition marks another strategic effort by FirstGroup to grow its transportation business through focused purchases within the UK market.
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