FirstGroup is braced for a fresh row with its biggest investor after the transport operator used proceeds from the sale of its American bus division to plug a hole in its pension fund.
New York fund Coast Capital Management is set to oppose the £3.3bn sale of First Student and First Transit amid concerns that shareholders will only receive about 10pc of the proceeds.
FirstGroup has been under siege from Coast Capital for two years.
The US activist masterminded the ousting of former chairman Wolfhart Hauser in 2019 before persuading the board to sell off its most lucrative two divisions.
FirstGroup struck a deal to sell off the businesses to investment firm EQT Infrastructure last month.
However, almost 90pc of the proceeds were used to plug a hole in the company’s retirement fund and pay down debt. The purchase is subject to approval from shareholders, with the company due to publish further details on voting in the coming weeks.
Analysts said that the decision to return just £365m of the headline price to investors left FirstGroup with a clean balance sheet.
The company’s board is now understood to be prioritising resuming its dividend.
One source said that although shareholders “would like more money back”, most were supportive of the company’s decision to repay pensioners and debts which include a £300m taxpayer-backed Covid loan.
Others are “not interested in what the company is going to do going forwards”, the source said.
The decision to fill a £336m hole in FirstGroup’s UK retirement fund comes weeks after the Pensions Regulator was given new powers to probe takeover deals that could adversely affect scheme members.
The Pension Schemes Act 2021 stipulates that companies must notify the Pension’s Regulator before selling a material part of their business.
The new laws followed public outcry over Sir Philip Green’s handling of the BHS pension scheme after the retailer collapsed in 2016.
A spokesman for Coast said: "Coast confirms that it reserves its rights in respect of this proposed transaction. But any transaction, were this to command the support of Coast Capital, would need properly to respect and protect the legitimate interests of all FirstGroup’s stakeholders including its investors, staff and pensioners."
FirstGroup’s decision to remit any of the proceeds to shareholders was attacked by guards union the RMT last week.
Outgoing RMT boss Mick Cash accused the company of “lining the pockets of its private investors”.
Mr Cash was this week replaced by Mick Lynch, who took over as the head of the union that has been a thorn in the side of South Western Railway, which is operated by FirstGroup and is one of Britain’s busiest train lines.
Thousands of workers on the railways have been subjected to a two-year pay freeze as part of Government measures to mitigate a £10bn subsidy to keep trains running during the pandemic.
Shares in FirstGroup rose 2.2pc to 74.7p in morning trading.
FirstGroup declined to comment.