Britain’s biggest train operator FirstGroup has rejected a £1.2bn takeover proposal from a US private equity firm, after its board determined the offer was too low. The bus and rail company said it had carefully reviewed the proposal from I Squared Capital, which first became public last month, but concluded that the 118p a share cash offer “significantly undervalues FirstGroup’s continuing operations and its future prospects”. It also said that another portion of the company’s offer, which would see shareholders paid up to 45.6p a share on top of the 118p, dependent on certain outcomes, did not provide investors with “sufficient certainty”. “Accordingly, the board has unanimously rejected the proposal,” FirstGroup said on Thursday. I Squared Capital, which focuses on energy, utilities, telecom and transport in the Americas, Europe and Asia, now has until 5pm on 23 June to either make a firm offer or walk away. FirstGroup shares fell 1.8% to about 134p each in morning trading. FirstGroup is the second major British transport firm targeted this year, with Stagecoach having backed a £595m offer from a pan-European infrastructure fund managed by Germany’s DWS Infrastructure. It trumped a £1.9bn merger previously agreed with its rival National Express. Companies including Stagecoach and FirstGroup have become takeover targets after the slump in bus and rail passengers hit their finances during the pandemic. Demand has also been slow to recover despite the lifting of lockdown restrictions that banned non-essential travel. FirstGroup employs 17,500 people and runs four of the UK’s rail networks under franchises awarded by the government: Great Western Railway, South Western Railway, TransPennine Express and Avanti West Coast. It also runs Hull Trains and Lumo on the east coast between London and Edinburgh, two “open access” operations that run trains on a commercial basis without franchises. The company is also the second-biggest bus operator in the UK, running services in cities such as Glasgow, Bristol and Leeds.