Stagecoach proposes National Express merger

STAGECOACH has confirmed that it has approached rival National Express about a possible merger following the collapse of takeover talks last week.

In a statment the group said that “at the invitation of the National Express board” on October 16 it sent a letter indicating terms under which it would be prepared to enter into talks regarding a merger.

The approach follows a statement from East Coast rail line operator National Express on Friday that a consortium led by Spain’s Cosmen family had decided not to make a takeover offer for the business.

Instead the consortium, which is made up of Spain’s Cosmen family and private equity partner CVC Capital Partners, will support a potential equity fund-raising by the bus and train operator.

Stagecoach had made a deal with the consortium regarding the possible acquisition of National Express’ UK bus and rail operations.

Newspaper reports over the weekend valued the potential merger at £1.65bn.

National Express today confirmed that it had received a “highly preliminary” proposal from Stagecoach that would leave its shareholders owning no more than 40% of the combined group’s stock.

It said it would consider the Stagecoach approach but would continue to explore an equity fund-raising.

“The board believes that it is now necessary to rapidly conclude this phase of potential corporate activity to avoid further disruption to the business and to allow the group to secure additional equity funding before the end of 2009,” it added.

“Notwithstanding this, the board will carefully consider the Stagecoach proposal whilst continuing to progress its equity funding plans in order to assess whether the Stagecoach proposal offers greater value and certainty to National Express

Meanwhile, National Express said it had not received a fresh proposal from FirstGroup. The transport operator proposed an all-share merger with National Express in June but ended talks in July.

National Express became an acquisition target after struggling with debt of around £1bn including a £20m loss on the East Coast line. National Express paid £1.4bn to run the route, based out of York.

Earlier in July, the Government said it would take the East Coast route back into public ownership later this year.

The group is due to issue an interim management statement on Thursday.