By Shashwat Awasthi
(Reuters) -British transport company Mobico’s shares plunged more than 30% on Friday after it said it would sell its U.S. school bus business for a less than expected $608 million and that it expects 2024 earnings at the lower end of its guidance range.
The sale to infrastructure investor I Squared Capital is part of efforts by the National Express owner to cut its more than 1 billion pound ($1.33 billion) debt pile.
The U.S. school bus operations had become too costly to run because of rising wages and potential tariff costs, Mobico said in a joint statement with I Squared Capital.
“We saw an opportunity in a sector we like, in a sector we understand,” said Mohamed El Gazzar, senior partner at I Squared, adding that it is a sector in which the fund would like to invest more.
The sale includes upfront net proceeds of about $365 million to $385 million, increasing by up to $70 million depending on future performance, Mobico said.
However, Jefferies analysts said the $608 million valuation was below their expectation of between $650 million and $1.57 billion.
Mobico’s shares sank as much as 33% to 39.36 pence and were set for their steepest one-day drop since October 2023.
The Birmingham-based company said it expects 2024 adjusted operating earnings at the lower end of its previous forecast range of 185 million pounds to 205 million pounds, mainly because of challenges in its UK and German businesses.
It had issued a profit warning last year when it highlighted accounting issues related to its German rail business.
Mobico was hit hard during the COVID-19 pandemic as lockdowns restricted travel and then by rising inflation, but it has recently reported an upturn in financial performance on the back of passenger growth and higher pricing.
(Reporting by Shashwat Awasthi in BengaluruAdditional reporting by Andres GonzalezEditing by Mrigank Dhaniwala, Susan Fenton and David Goodman)
