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Transport firm FirstGroup has rejected a £1.2bn takeover proposal from an American serial suitor.

The Aberdeen-based company said it believed the upfront cash part of the unsolicited approach from I Squared Capital Advisors was too low.

It argued that the offer "significantly undervalued FirstGroup's continuing operations and its future prospects".

It added a separate conditional part of the bid did not provide shareholders "with sufficient certainty".

The cash part of the deal was worth about £885m to shareholders, while the second could have given them an additional £340m.

FirstGroup revealed last month that it had received a new offer from I Squared, after a series of "unsolicited" and "conditional" proposals which had all previously been rejected.

The latest offer was worth up to 163.6p a share in total, giving FirstGroup a valuation of £1.23bn.

That represented a premium of 37%, compared with FirstGroup's closing price of 119.40p on 25 May - before the offer was revealed.

FirstGroup said in a statement that its board had "unanimously rejected" the approach.

I Squared must make a firm offer by 17:00 on 23 June or walk away under City Takeover Panel rules.

FirstGroup is due to reveal its annual results next week.