Wednesday, 15 December 2021

National Express £470 Million Offer for Stagecoach Agreed

National Express has agreed an all-share takeover of rival Stagecoach but admitted the £1.9bn tie-up could face regulatory hurdles to get over the line.

The two companies indicated the tie-up would result in cost savings and provide new growth opportunities as they recover from the huge hit to business inflicted by the COVID-19 pandemic that saw demand for travel collapse.

The deal will bring together the two largest UK companies who operate buses and coaches including Nat Ex and Megabus brands. 

About 50 jobs are expected to be cut from the head offices, IT and corporate departments of the two firms, under plans to slash annual costs by at least £45m following the merger.

But the companies stressed there would be no job losses among drivers, or depot closures, as a result of the deal.

The terms would see Stagecoach shareholders receive 0.36 new National Express shares for each Stagecoach share they own, giving them around 25% of the combined company,
that figure valuing Stagecoach at around £470m.

It would give them a 25% stake in the merged group.

The terms represent an 18% premium on the closing price of Stagecoach shares on the night before the talks were revealed.

Stagecoach was launched by Sir Brian Souter and his sister, Dame Ann Gloag, in 1980. The takeover marks the end of the Souter family’s long interest in the sector, having grown out of a small local bus company to one of the main players in Britain’s privatised bus and rail industries.

The operator’s fortunes dipped when it overbid for the East Coast rail franchise and its Virgin Trains operation was lost due to disagreements with the DfT over risks in funding of pension funds.

National Express made its approach 12 years after it spurned the offer of a £1.7bn merger from Stagecoach.

It admitted that the deal, which is subject to shareholder approval, was also likely to attract the attention of the Competition and Markets Authority (CMA) as the enlarged company would control 40,000 vehicles and 70,000 staff.

National Express said it could not rule out the prospect of the combined company being required to take "remedial action" in a bid to secure a green light in advance.

Both companies have exited from UK rail operations, but National Express still runs trains in Germany and buses in the US, Canada, Morocco and Spain.

CMA concerns would be likely to centre on whether the deal weakened competition in certain regions and routes or raised the prospect of higher fares.

Ignacio Garat, the National Express CEO, has said: "The proposed combination of National Express and Stagecoach, and the unique strengths of both companies and their teams, will create a leading multi-modal passenger transport business in the UK, aiming to deliver superb services to customers and forging the way to a carbon free future with a new generation of zero-emission buses and coaches.

Stagecoach chief executive Martin Griffiths said: "This is an exciting opportunity to bring together two of the UK's iconic transport brands to create a strong, diverse business that is well-placed to grow the market for greener and smarter public transport for the benefit of all stakeholders."