The bus and rail operator said it had rejected previous approaches from I Squared and was now evaluating a proposal of 118 pence per share in cash and a contingent right of up to 45.6 pence apiece, which is based on the outcome of its divestment of First Transit and net proceeds from the Greyhound sale.

FirstGroup shares jumped as much as 15% to 138 pence, hitting levels not seen since 2019. Based on the stock's last close, the company has a market value of about 896 million pounds ($1.26 billion).

Peer StageCoach, the country's biggest bus and coach operator, earlier this year backed a 594.9 million pound takeover offer from a European infrastructure fund that trumped a bid by rival National Express.

Global infrastructure firm I Squared Capital, which has offices in London, Hong Kong, Miami, Singapore and New Delhi, focusses on energy, utilities, telecom and transport in the Americas, Europe and Asia.

FirstGroup has in the past year sold off its North American operations - school bus operator FirstStudent and FirstTransit - to Swedish group EQT.

It also offloaded its iconic Greyhound intercity bus brand, leaving it with the remaining UK rail and bus operations.

($1 = 0.7960 pounds)

(This story corrects pound to dollar conversion in paragraph 3 to billion from million)

(Reporting by Yadarisa Shabong in Bengaluru; Editing by Rashmi Aich)