Leader of Parent Company for National Express Steps Down as Transport Corporation Faces £609 Million Deficit
Mobico's CEO is stepping down amidst a storm of controversy, following the company's massive loss last year. The National Express owner, now known as Mobico, recorded a pre-tax loss of £609.3 million for 2024, a significant increase from the prior year's £120.1 million loss.
The selling of Mobico's North American school bus division, agreed to help pay down its debt, has caused investor uproar. Critics argues the division was sold at a price significantly below some valuations, driving shares lower. The $608 million deal with I Squared Capital netted proceeds of approximately $365 million to $385 million, but failed to meet estimated valuations of up to £1.2 billion by Jefferies.
Investors, unsatisfied with the deal and the company's performance, have expressed doubts about Mobico's board, considering the transaction a "terrible deal for shareholders" that risks "permanently destroying value." Mobico's shares have already fallen roughly 70% since the group changed its name from National Express to Mobico in 2023.
Outgoing CEO Ignacio Garat acknowledged the challenges faced by the company, but was proud of the work of the 51,500 employees. He will stay with the firm for the next 12 months to aid in the search for a replacement.
The sale of the US bus unit to I Squared Capital was seen as an attempt to tackle the company's financial woes, yet investors pointed out several issues:
- The upfront proceeds were deemed inadequate to significantly reduce net debt.
- An earn-out clause falls short of compensating for the division's future performance risks.
- The sale comes after a series of market headwinds, including driver shortages, wage inflation, and revenue shortfalls.
- The deal was agreed upon against a backdrop of leverage concerns, earnings outlook uncertainties, and historical issues of trust, including a 2023 rebranding and 2024 audit delays.
Overall, Mobico's sale of its North American school bus division has sparked controversy due to lower-than-expected valuation and persistent financial concerns, compounded by broader investor skepticism and market reaction as a vote of no confidence.
- Despite the sale of Mobico's North American school bus division, investors remain skeptical, dismissing the deal as inadequate to significantly reduce the company's net debt.
- The deal's earn-out clause, intended to compensate for the division's future performance risks, has been criticized as falling short by investors.
- The decision to sell the division has occurred amidst a series of industry challenges, such as driver shortages, wage inflation, and revenue shortfalls, creating additional headwinds for Mobico.
- The transaction was agreed upon in the midst of concerns regarding leverage, earnings outlook uncertainties, and historical issues of trust, including a 2023 rebranding and 2024 audit delays, further contributing to investor dissatisfaction and market backlash.
