Shares in the transport company Go-Ahead Group (LON: GOG) have rallied over 40% since the start of this week as the company finds itself in the limelight with two simultaneous takeover bids.
The company has been embroiled in take-over talks since the start of this year and on Monday said it had accepted a £650mn offer from a consortium made up of Australian bus operator Kinetic Holding and Spain’s transport infrastructure company Globalvia. The cash offer was for £15 per share including a special dividend, which was 24% higher than the company’s closing price on Friday.
The bid has strong international backing: both Kinetic and Globalvia are supported by Canadian pension fund OPT Trust while Dutch pension fund PGGM and UK’s Universities Superannuation Scheme each own stakes in transport infrastructure manager Globalvia Inversiones.
But Australia’s largest bus group and sea transport operator Kelsian asked shareholders to hold back on a decision while Kelsian prepares a counterbid for the transport group which runs London’s red buses. Go-Ahead had turned down four earlier offers including one made in January at £9.75 per share.
Timing could not be better really
The timing couldn’t better for the group which has been marred by accusations of overcharging UK taxpayers, fined £23.5m in March this year by the government and has lost its contract to run one of Britain’s biggest networks Southeastern over accounting issues. The issue doesn’t seem likely to run out of steam just yet. In April the Financial Reporting Council started investigating Deloitte over its auditing of Go-Ahead’s accounts in the six-year period to 2021.
Since the Kinetic offers, shares in the transport group have risen to £15.83, up 43.12% since the start of the week. But for any meaningful comparison we have to look back to the pre-Covid trading levels in 2018 and 2019 when this was the lowest share price and when prices oscillated between £18-£21 per share.
Had it not been for the loss of the Southeastern rail route the company’s half year results would have shown growth as commuter numbers continued to pick up and were back at about 80% of the pre-Covid level. Revenue for the six months to 1 January 2022 was down 13.2% at £1.797 billion and adjusted profit before tax was down 18% at £37.1 million.
For comparison, full year revenues in 2019 were £3.8 billion. Statutory profit before tax includes a net exceptional credit of £13.0m associated with the expected settlement of the financial penalty relating to London & South Eastern Railway.
The firm said recently it has set a medium-term target of about £4bn for annual revenue, an increase of 30% on last year, and an increase in annual operating profit to about £150m. As mass transport recovered post-pandemic, the company also decided to pay out a dividend of at least 50p per share for the year to 2 July.
The group operates trains on dense commuter routes in and out of London including Southern, Gatwick Express, Great Northern and Thameslink. Its bus network includes routes in London and elsewhere in the UK including the routes around Manchester. Go-Ahead also runs bus and rail services in Ireland, Singapore, Norway, Sweden and Germany.