FlixMobility Acquires Greyhound in $78M Deal

FlixMobility Acquires Greyhound in Major U.S. Expansion

FlixMobility, a German transportation company valued at $3 billion, has announced the acquisition of Greyhound Lines, the well-known U.S. bus network. The purchase, made from U.K.-based FirstGroup, signifies a substantial investment in the American market for the long-distance bus operator.

Deal Details and Financials

The enterprise value of the deal is $46 million, calculated on a debt-free and cash-free basis. An additional unconditional deferred consideration of $32 million, accruing interest at a rate of 5% annually, is also included in the agreement.

FirstGroup initially acquired Greyhound in 2007 for $3.6 billion. However, the company has recently been streamlining its U.S. holdings to concentrate on its U.K. operations. Efforts to divest the assets now acquired by Flix began as early as 2019.

Expanding Market Presence

This acquisition isn't simply about network expansion for Flix; it’s about establishing a stronger foothold and brand recognition within the U.S. FlixBus currently operates in over 2,500 destinations across 36 countries, facilitating approximately 400,000 daily connections.

Greyhound’s reach is comparable, serving 2,400 destinations in North America and transporting nearly 16 million passengers each year. While Flix reported over 62 million customers in 2019, pre-pandemic figures, travel restrictions likely caused a significant decrease in recent years.

Greyhound’s Iconic Status

The deal leverages the established brand recognition of Greyhound, a cultural icon in the United States. The company has been referenced in numerous songs, films, and other artistic expressions.

Despite a decline in profitability for FirstGroup, Flix believes there remains considerable potential in long-distance bus travel. The service proved particularly attractive during the pandemic as a cost-effective travel option amid rising gas prices and expensive airfare.

Leveraging Technology for Efficiency

Flix’s success is partly attributed to its technological approach. Similar to companies like Uber and BlaBlaCar, Flix utilizes advanced algorithms to optimize pricing, routing, and scheduling for its bus network. It has often been described as the “Uber of buses.”

Traditionally, Flix operates by partnering with independent bus companies, branding their vehicles under the FlixBus name. However, the Greyhound acquisition suggests a potential shift towards greater fleet ownership.

Strategic Implications and Future Plans

The $650 million funding round secured earlier this year, specifically earmarked for U.S. expansion, raised questions about Flix’s long-term strategy regarding fleet ownership. The inclusion of a fleet with the Greyhound purchase indicates a possible move towards more direct control over its transportation assets.

Jochen Engert, co-founder and co-CEO of FlixMobility, stated that the acquisition is a key step in the company’s global growth strategy, emphasizing a shared vision for accessible, affordable, and sustainable mobility.

André Schwämmlein, also a co-founder and co-CEO, added that the combined strengths of FlixBus and Greyhound will better address the growing demand for smart and sustainable travel options in North America. He anticipates replicating the success achieved in 36 other countries.

Transaction Specifics

Here's a breakdown of the transaction details, as provided by a Flix spokesperson:

• FirstGroup will receive $172 million in cash, including an initial payment of $140 million and $32 million in deferred consideration paid over 18 months.
• Greyhound properties, valued at approximately $176 million, will be retained by FirstGroup and initially leased back to Greyhound, with plans for sale within the next 3-5 years.
• FirstGroup will also retain certain legacy Greyhound liabilities, totaling $320 million as of March 27, 2021, along with other items estimated at a net cost of $47 million.
• The initial $140 million cash proceeds will be used to address these legacy liabilities, with the remaining value from property sales and deferred consideration expected to yield approximately $178 million (£128 million) over time.
• The transaction is effective immediately and does not require any further closing conditions.