This morning, the Board of FirstGroup announced that it is has received a series of unsolicited, conditional proposals from I Squared Capital Advisors (UK) LLP in relation to a possible offer for the company. Previous proposals have been rejected by the FGP Board, but it is currently evaluating the latest approach, consisting of a cash component of 118p per share and a contingent right to up to a further 45.6p per share depending on potential net proceeds from the First Transit earnout and the Greyhound legacy assets and liabilities (including property and deferred consideration). I Squared Capital is an independent global infrastructure manager focusing on energy, utilities, telecom, and transport. There has been a noticeable pickup in corporate activity in this space in recent times, evidenced by successful cash offers for Stagecoach plc as well as Nobia AB (the largest Nordic public transport operator) earlier this year by infrastructure funds. Public transport operators provide attractive and stable portfolios of bus networks and rail contracts, typically with a high degree of visibility and a low degree of volatility. Public transport is expected to play an increasingly important, some would argue essential, role in the decarbonisation targets of national governments, as well as local/regional authorities, going forwards, making them potentially attractive targets for those investors with a longer-term investment horizon. Following today’s announcement, we have raised our target price to 128p, in line with the current share price and a modest premium to the proposed offer price of 118p. This values FGP on a prospective P/E and EV/EBIT of 15.9x and 9.0x FY23E, the first post-pandemic year of nornalised performance and implies a generous premium to historical 10-year averages (e.g. the ten-year P/E (+12m) is c.10x). We retain our Hold recommendation.