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Investing.com -- FirstGroup (LON:FGP) stock rose 3% after the transportation company announced the acquisition of Tetley’s Motor Services Limited, a coach and bus operator based in Leeds.
The acquisition brings 55 coaches and buses to FirstGroup’s fleet, along with a large depot in central Leeds adjacent to an existing First Bus facility. Tetley’s Coaches reported earnings before interest and taxes (EBIT) of £1.4 million on revenues of £5.3 million for the 12 months ending March 31, 2024.
Tetley’s operates various transportation contracts including services for schools, universities, workplace shuttles, and private hire in Leeds and West Yorkshire. A significant portion of the company’s contract portfolio has been recently renewed, providing stability to the business. Ian Tetley, Managing Director of Tetley’s Coaches, will remain with the business during its integration into First Bus.
"We view FirstGroup’s series of bus bolt-on acquisitions favourably, so welcome another margin-accretive deal, which would further diversify Bus revenues. We think FirstGroup has generally paid lower transaction multiples than both our valuation, and also the market-implied valuation of Bus, meaning these bolt-ons are not reliant on potential synergies to be accretive," noted analysts at RBC.
The acquisition represents another strategic move by FirstGroup to expand its transportation operations through targeted acquisitions in the UK market.
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