First Group seeks funds for U.S. schoolbus growth

By John Bowker

LONDON (Reuters) - Rail and bus firm First Group (FGP.L) said on Wednesday it planned to raise between 230 and 240 million pounds in a share placing to help fund growth in the United States.

The company, which bought the owner of the Greyhound bus network Laidlaw for $3.5 billion (1.8 billion pounds) last year, said the placing would partly be used to refinance debt from the deal but would also go towards expansion.

"The truth is, we need flexibility in our balance sheet to continue growth plans," Chief Executive Moir Lockhead told reporters, adding there were still 5,000 privately owned school bus operators in the United States.

He added that synergies from the Laidlaw acquisition would now be a better than expected $150 million a year, up from an original forecast of $70 million, and that the Greyhound business was now growing revenues.

"The (Greyhound) buses were not punctual (when we bought it). Only 60 percent were on time. In April we got that to just under 90 percent," Lockhead said.

Shares in First Group were down 7.5 percent at 554 pence at 9:10 a.m., valuing the company at 2.5 billion pounds. The placing of 43.7 million shares would fetch 526-549 pence each to raise 230-240 million pounds.

First Group said adjusted operating profit for the year to end March was up nearly 40 percent at 360 million pounds, in line with expectations, and that its outlook was positive.

Lockhead said the group had hedged fuel costs for all of this year and 10 percent of 2009/10, and that it was basing its policy on oil at $100-$120 a barrel.