Investing.com -- Mobico Group on Friday said that they have agreed to sell its North America school bus business to infrastructure investor I Squared Capital for an enterprise value of up to $608 million, as the UK-based transport operator moves to cut debt and reallocate capital toward higher-growth segments like ALSA, sending shares sinking over 26%.
The deal values the school bus unit at around five times its expected 2024 adjusted EBITDA of $122 million, or roughly 5.6 times pre-IFRS 16.
The business is expected to contribute approximately £9 million to the group’s adjusted operating profit in 2024.
Mobico will receive estimated net upfront proceeds of $365–385 million after deductions for leases, deferred capex, and transaction costs.
A further $70 million may be received as an earn-out, subject to post-sale performance. The transaction is expected to close in the third quarter of 2025, pending regulatory approvals.
The company said the disposal would immediately reduce reported net debt, which will also reflect the removal of $38 million in IFRS 16 leases tied to the school bus unit. Mobico intends to retain the proceeds to support deleveraging.
RBC Capital Markets described the valuation as in line with its own sum-of-the-parts estimates, which value the North America division at £666 million.
Analysts at RBC noted that the agreed terms fall short of the upside scenarios it had previously modelled using higher multiples.
RBC added that Mobico’s updated guidance of delivering full-year adjusted operating profit at the lower end of its £185 million to £205 million range aligns more closely with consensus forecasts.
The school bus unit has shown signs of recovery since the pandemic, including its first net-positive route outcome in over a decade.
However, Mobico said the capital demands, persistent wage inflation, and future cost pressures made divestment the most viable long-term strategy.
Capital investment in the unit had exceeded £200 million over the past three years without generating significant free cash flow.
Chief executive Ignacio Garat called the sale “a significant milestone” for the group, stating that the company is now better positioned to focus on strengthening the balance sheet and investing in growth opportunities, particularly through ALSA.
The sale is expected to simplify Mobico’s portfolio and free up resources for businesses with stronger cash flow and return potential.
The company will retain responsibility for around £65 million in pre-completion liabilities related to historical claims within the school bus operation.
Following the transaction, Mobico said that the smaller, more focused portfolio could increase exposure to adverse developments in remaining markets, including the UK, Germany, and Spain.
Mobico is set to report full-year results on April 29, it expects a statutory loss for 2024, due to non-cash impairments, write-offs of deferred tax assets, and provisions related to its German rail operations.