Stagecoach in talks with National Express bidders

STAGECOACH has confirmed it is in exclusive talks with potential buyers of National Express over a possible break-up of its rival.

Stagecoach has expressed interest in certain assets and businesses should the bid by a consortium made up of Spain’s Cosmen family and private equity firm CVC be successful.

However, the firm has not ruled out making its own bid saying it will also consider “all other options”.

First Group pulled out of the bidding war for East Coast rail route operator National Express last week.

It first emerged in June that bus and train operator FirstGroup had approached National Express about a “friendly and recommended” merger to create a major British transport group that could compete strongly in the US and Europe.

However that was rejected by its rival, which subsequently saw its loss-making East Coast rail route – which links Yorkshire with London and Scotland – taken over by the Government after National Express tried to renegotiate the terms of its £1.4bn franchise.

Now there is speculation over the future of its other rail franchises following that decision.

In a recent report the Commons transport committee said operators were making profits in good times but forcing the government to step in when revenues fall.

It wants the government to offer longer franchises to encourage companies to invest in their services.

The report also urged the government to run East Coast trains itself. It said nationalisation could be a way of comparing the performance of the public and private sectors.

The report also found operators had exploited a loophole to charge “unacceptable” fare rises at up to 11% above inflation. Passengers had to go to “extraordinary lengths” to get cheap fares and that fares had risen out of all proportion to the rest of the economy, it said.

Stagecoach is the UK’s biggest rail franchise operator, running South West Trains, Virgin Trains and East Midlands Trains. It also operates buses and coaches around the UK including Megabus.

Four years ago the Cosmen family sold the coach firm Alsa to National Express for £149m and a 10% holding in the firm. However, the family’s stake in the firm has since risen to 18.5%.