Labour and the RMT union have warned the US private equity firm Apollo Global Management off pursuing its interest in the transport firm FirstGroup, after the British company rejected a takeover approach.

FirstGroup, which operates UK rail franchises including Great Western and TransPennine Express, nearly 20% of local bus routes outside London and the US Greyhound coach service, said it had turned down a proposed cash bid from Apollo that it claimed “fundamentally undervalues the company and is opportunistic in nature”.

It did not say how much Apollo had offered but its shares closed up more than 8% on Thursday after it disclosed the approach, taking its stock market value to £1.3bn.

Under UK takeover rules, Apollo, which owns companies including Claire’s Accessories and the US restaurant chain Chuck E Cheese’s, has until 9 May to make a firm offer or walk away.

But Labour and the RMT indicated that Apollo would face fierce opposition, with scrutiny of takeovers particularly intense after the turnaround specialist Melrose’s controversial, but ultimately successful, pursuit of engineer GKN.

The shadow transport minister, Andy McDonald, criticised the government’s handling of rail franchises after the bailout of Stagecoach and Virgin Rail on the East Coast line earlier this year.

“Rail franchising is in chaos and has already cost the taxpayer billions of pounds in bailouts over the last year,” he said. “Companies know that the government will come to their rescue if they fail and are encouraged to take ever greater risks.

“The last thing public transport in the UK needs is for FirstGroup to be taken over by a company that will aggressively cut costs and extract even greater profits at the expense of taxpayers and passengers.”

The RMT general secretary, Mick Cash, said: “This looks like another bunch of speculators and asset strippers homing in on the British transport sector.

“First have been propped up by the government on the Great Western routes for many years now and where this hostile bid leaves their UK bus and rail operations is anyone’s guess. The only solution to this kind of uncertainty and instability is public ownership.”

Apollo declined to comment on its interest in FirstGroup.

Analysts at stockbrokers Investec and Liberum Capital said Apollo could be looking to break up FirstGroup and sell off divisions to other buyers.

But Liberum pointed to the political difficulty of such a plan.

“The acquisition of a large UK employer providing essential services to the public by a foreign private equity fund seems unlikely to be welcomed in the current political environment,” it said. “Even before that, private equity ownership of rail franchises seem unlikely to be acceptable.”

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