FirstGroup plc announced its agreement to acquire RATP Dev Transit London, a major bus operator in Central and West London. This acquisition includes 10 depots (four owned and six leased), a fleet of approximately 1,000 buses (one-third of which are electric), and around 3,700 employees. The deal also encompasses approximately 90 Transport for London (TfL) route contracts, with a combined revenue of £271 million for the year ending December 31, 2023.
The transaction is valued at £90 million, financed through £45 million from FirstGroup’s cash reserves and the assumption of £45 million in vehicle finance leases. The enterprise value is further supported by physical assets, including freehold properties worth approximately £50 million.
RATP Dev Transit London was formed in December 2021 as a joint venture between RATP Dev and Kelsian Group. It consolidated RATP’s London Sovereign and London United operations along with Tower Transit’s Westbourne Park garage under the “London Transit” brand. By September 2023, RATP Dev became the sole owner after acquiring Kelsian’s 12.5% shareholding.
The operator has been a leader in electrification efforts within London’s bus network, with over 34% of its fleet already electric and plans to transition fully by 2030. However, financial challenges such as inflation, driver shortages, and strike-related pay increases led to operational losses amounting to €26 million (£23.2 million) in 2022.
FirstGroup’s acquisition marks its entry into London’s competitive TfL-contracted bus market. With this move, FirstGroup aims to leverage RATP London’s existing turnaround plan, which has improved operational efficiency and cost control. The company expects annual revenues from the acquired operations to grow to £300-350 million over the next five years, with operating margins aligning with historical London averages of 6-7%.
The acquisition aligns with TfL’s goal of achieving a zero-emission bus fleet by 2034. FirstGroup plans to invest in depot electrification and fleet upgrades to capitalise on these electrification mandates.
Despite initial operating cash outflows of approximately £30 million over the first two years, the business is projected to become cash-positive by FY 2027.
