{
  "docId": "019dd923-622b-71dc-a6db-e6b6bb0421c6",
  "docSlug": "e9bc06261f48",
  "documentTitle": "FirstGroup plc (FGP)",
  "authorId": "08_Sandell",
  "authorName": "Sandell Asset Management",
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  "sourceTypeLabel": "Activist investor",
  "presentationDate": "2014-01-15 00:00:00",
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  "pageNumber": 37,
  "pageCount": 56,
  "prevPage": 36,
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  "notes": "Includes detailed financial tables for pro forma capital structure, credit metrics, and valuation scenarios.",
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      "text": "Long-term contracts and strong asset base at FirstGroup US can support higher debt levels at lower cost, providing a cash distribution to FirstGroup immediately prior to spin-off",
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      "text": "Spin-off of First Student & First Transit into “FirstGroup US”\n- Immediately prior to spin-off, raise new debt at FirstGroup US, with proceeds distributed to New FirstGroup\n- Long-term contracts and strong asset base at FirstGroup US can support higher debt levels at lower cost, providing a cash distribution to FirstGroup immediately prior to spin-off\n- FirstGroup US can lower cost of capital by committing to a shareholder-friendly dividend policy and catering specifically to income-oriented investors, lowering its cost of equity and garnering a premium multiple\n- Anticipate FirstGroup US to operate on the STB model\n- Distribute free cash after maintenance capex to shareholders\n- Growth capex funded by capital markets as opportunities arise\n- Such a transaction is not prohibited under the Company’s bond issues\n- We understand that the Company’s bank facilities do have restrictive covenants, but the facilities are not currently drawn down and we believe they can be replaced at minimal cost\n- The Company’s bond covenants do not prohibit a spin-off of the nature contemplated under the Proposals\n- FirstGroup US will cease to guarantee the Company’s obligations under the bonds",
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      "kind": "metric",
      "text": "Value of FirstGroup US per FGP Share: £1.10",
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      "kind": "source-note",
      "text": "Source: Company filings, broker research, Sandell estimates (as included in slide 36), Bloomberg.\n(1) Based on Sandell’s analysis of the bond documents and public disclosures made by the Company.\n(2) Sandell estimates. Interest coverage defined as EBITDA less capex / interest expense. FFO defined as estimated net income plus depreciation. Net debt includes capital leases.\n(3) Raise new debt for 4x EBITDA, including capital leases.",
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      "kind": "table",
      "text": "Pro Forma FirstGroup US Capital Structure (2)\nNew Debt (3) $1,571\nExisting Capital Leases (3) $509",
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      "kind": "table",
      "text": "Pro Forma FirstGroup US Credit Metrics (2)\n2014 2015 2016\nNet Debt / EBITDA 4.1x 3.9x 3.7x\nInterest Coverage 2.7x 3.0x 3.3x\nFFO / Net Debt 17.4% 18.4% 19.4%",
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      "kind": "table",
      "text": "Valuation - FirstGroup US (2)\nBase High\nFY2015 Adj. EBITDA $548 $548\nEBITDA Multiple 7.5x 8.0x\nAdj. TEV $4,109 $4,383\nNet Debt $2,080 $2,080\nNon-Recurring Costs $120 $123\nEquity Value $1,909 $2,180\nValue of FirstGroup US per FGP Share £0.96 £1.10\nTEV $3,988 $4,260\nNew Debt at FirstGroup US $1,571 $1,571\nCash Distributed to FGP per Share (£) £0.79 £0.79\nImplied FCF Yield FY2015 6.8% 6.0%",
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      "kind": "title",
      "text": "Step 1: FirstGroup US spin-off",
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