An uncharitable reading would be two drunks propping each other up at the bar. Both have suffered terribly from the pandemic and could do with support. Ultimately, though, the pain is likely to be temporary and the advantages makes sense in any circumstance.
Both businesses operate large fleets that could benefit from shared servicing. Both need to invest large sums to get ready for the Net Zero future. A combined balance sheet offers more borrowing power and heftier buying power.
In many ways, what’s surprising is that this deal hasn’t happened sooner. Stagecoach first tried to buy National Express in 2009. Activist investor Elliott advocated for a merger at National Express three years later. It’s been a coy dance ever since.
Stagecoach’s exit from UK rail in 2019 — a business National Express has nothing to do with — made its rival look more seriously at a tie-up and the blow from the pandemic seems to have been the final spur.
The one thing that could burst the tyres on this deal is the competition watchdog. A deal with this much impact on the UK’s transport infrastructure will no doubt be scrutinized closely. Both sides will likely argue that the overlap between their businesses is limited. As UBS points out, the UK is just 20% of National Express’ business compared with 80% for Stagecoach.
After long delays, this deal could finally be arriving.