Oct 20, 2022 - Economy

EQT holding onto school bus empire, selling other bus operator

Illustration of a pattern of beer school buses.

Illustration: Allie Carl/Axios

When most people think of school buses, it's likely about controlled chaos or driver shortages. When private equity giant EQT thinks about school buses, it's about profits and a job not yet done.

Driving the news: EQT in early 2021 paid $4.6 billion to buy Cincinnati-based school bus operator First Student and municipal bus operator First Transit from London-listed FirstGroup. Now it's seeking to sell off the municipal business while retaining the school business, as first reported by Bloomberg and confirmed by Axios.

Why it matters: First Student is the country's largest school bus operator, with around 40,000 vehicles. Per its website: "First Student completes five million student journeys each day, moving more passengers than all U.S. airlines combined."

Backstory: EQT's original thesis was around post-pandemic returns to work and school, both of which played out. But a source familiar with the situation says that the plan always was to create a pure-play student transport company by spinning off the First Transit business.

  • To that end, EQT quietly separated what had been integrated businesses, including different boards of directors.
  • Bloomberg reports that First Transit likely would fetch just shy of $1 billion, with rival transport companies to kick the tires.
  • EQT declined an Axios request for comment.

Look ahead: First Student benefits from a massive incumbent advantage, as school districts are loathe to change out companies that have the demonstrated capacity and knowledge to service their routes.

  • EQT also has a deep bankroll that's been able to make several acquisitions, albeit minor enough to evade antitrust scrutiny.
  • It's also pushing hard on electrification, which is a key initiative of school districts, other government entities and bus OEMs. To that end, a big set of federal grants for school bus electrification is expected to be awarded within weeks.
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