EQT holding onto school bus empire, selling other bus operator

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.