National Express ends merger talks
EAST Coast rail line operator National Express announced today that all discussions over a possible merger with rival Stagecoach had now ceased.
The firm said that following discussions over due diligence requirements it had been decided that the “timing and feasibility” of obtaining debt financing for the enlarged group, the requirement for future equity issuance and necessary disposals would not be successfully executed by the end of the year.
In a statement it said: “Accordingly, to avoid any further disruption to the business and to allow the group to secure the additional equity funding it requires before the end of 2009, all discussions with Stagecoach have now ceased.”
It confirmed its intention to pursue an equity fund-raising with an announcement expected next month.
Stagecoach said it was “disappointed” with National Express’s decision as it believed there was a compelling strategic and financial proposition for a merger.
It said: “Stagecoach was confident that such a transaction was deliverable in terms of any potential competition issues and had in place a clear plan with identified remedies.
“Furthermore, Stagecoach was confident that such a transaction could have been financed within an appropriate timeframe.”
The transport group added that analysis showed there were a number of businesses within the National Express portfolio that were delivering sub-optimal performance and that it was confident it could have improved them.
It also said that it would have sought to rebuild the working relationship with the Department of Transport that has clearly broken down with National Express, thereby removing a major area of uncertainty for National Express shareholders in relation to its existing rail franchises.
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 this month a consortium led by Spain’s Cosmen family announced it had decided not to make a takeover offer for the business.
Stagecoach had made a deal with the consortium regarding the possible acquisition of National Express’ UK bus and rail operations.
Newspaper reports had valued the potential merger between Stagecoach and National Express at £1.65bn.
