Bus and train operator FirstGroup has rejected a call by a major investor to retreat from the United States in order to focus on its UK operations.

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New York-based Sandell Asset Management, which holds a 3.1% stake in the UK-listed company, wants FirstGroup to offload its US inter-city bus service Greyhound and spin off the rest of its North American arm, which includes school bus services for six million students.

It believes the changes will strengthen the group’s balance sheet and better prepare the company for the upcoming round of UK rail franchise bids, as well as enabling it to invest in the turnaround of its UK bus arm.

But FirstGroup, which is a major operator of bus services in East Anglia and is a potential rival to current operator Abellio for the new long-term Greater Anglia rail franchise due to commence in October 2016, dismissed the proposals as not compelling and containing structural flaws.

FirstGroup said it remained committed to existing plans announced in May under which it will pour £1.6billion into a four-year investment programme and tackle debts of nearly £2billion.

The company, which is due to provide investors with more details of its plans on January 23, added: “We remain focused on the vigorous execution of our strategy.”

FirstGroup shares rose 3% today after Sandell said it would lobby other shareholders to support proposals that it believes will set the company “on the right path to long term success”.

Chief executive Tom Sandell said: “Our established track record in company analysis and our sector expertise tells us that FirstGroup can turn around its historic poor performance by focusing on its UK rail and bus businesses.”

FirstGroup’s recent difficulties largely stem from the Department for Transport’s botched tender process for the West Coast mainline franchise, which resulted in its takeover from Virgin being put on hold and decisions on other rail operations delayed.

The company, which recently tapped investors for £615 million and cancelled its dividend, has warned that its turnaround plans required “hard work and persistent delivery” for some time to come.

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