(Bloomberg) -- British bus and train operator FirstGroup Plc said it’s evaluating a takeover approach from I Squared Capital Advisors that could value the UK firm at as much as 1.2 billion pounds ($1.5 billion).

FirstGroup received the latest in a series of “unsolicited, conditional proposals” from I Squared late Wednesday and disclosed it in response to movements in its share price, according to a statement. 

The outline bid has a cash component worth 118 pence a share, plus a potential 45.6 pence a share based on proceeds from previously agreed FirstGroup disposals. Shares of the Aberdeen, Scotland-based company traded 8.5% higher at 129.50 pence Thursday morning in London, after earlier surging almost 16%.

FirstGroup is attracting bid interest after reversing a foray into North America under pressure from activist investors. The company last year sold its iconic yellow school bus business, the largest in the U.S., to EQT Infrastructure of Sweden in a $4.6 billion deal. That was followed by the disposal of struggling long-distance bus operator Greyhound to Germany’s FlixMobility GmbH.

The transactions have left the company focused on UK transport activities, including buses in Manchester, Leeds and Leicester.

Rail Services

FirstGroup also runs a number of high-profile train services, among them Avanti West Coast, Britain’s busiest north-south route, operated with Italian state Trenitalia. It operates the South Western Railway commuter line to London Waterloo Station in a partnership with MTR Corp. of Hong Kong.

FirstGroup and Trenitalia have also been selected to provide services on the HS2 high speed line from London to Manchester via Birmingham once it opens.

I Squared is a Miami-based infrastructure investment firm with about $34 billion in assets under management. Last year it teamed up with TDR Capital on a $3 billion takeover of Glasgow, Scotland-based Aggreko Plc, one of the world’s biggest suppliers of portable power generators.

The approach for FirstGroup extends a run of merger activity in Britain’s public transport sector. Bus operator Stagecoach Group Plc backed a cash bid from a fund managed by DWS Infrastructure in March that topped an agreed deal with rival transport firm National Express Group Plc.

State-Owned Competitors

UK firms have found it increasingly tough to compete in the sector, especially in rail, where state-owned foreign firms have grabbed many government contracts, aided by lower borrowing costs. Other players were taken out in an earlier phase of consolidation, with Arriva owned by German state railway Deutsche Bahn AG since 2010.

Public transport has been less exposed to losses during the coronavirus pandemic than most other parts of the travel industry, with the government providing support while funding skeleton services during lockdowns. Changes to UK rail contracts have also reduced the risk carried by operators, while capping returns.

Jefferies analyst Becky Lane said in a note that he I Squared bid “reflects international confidence in the UK public transport landscape.”

(Updates with details of FirstGroup’s operations from fifth paragraph, consolidation trend from ninth, analyst comment in last)

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