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National Express unveils £480 million all-stock takeover bid for Stagecoach

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Stagecoach has confirmed talks over a potential all-share takeover by rival National Express (Dave Thompson/PA) (PA Archive)
Stagecoach has confirmed talks over a potential all-share takeover by rival National Express (Dave Thompson/PA) (PA Archive)

A surprise deal in the transport sector ignited shares in both National Express and Stagecoach today.

Coach operator National Express announced the unexpected bid for rival Stagecoach, the UK’s biggest bus company. It is offering Stagecoach investors 0.36 of stock for every share they hold.

The deal would give Stagecoach investors 25% of the combined business, creating a transport powerhouse with a value of around £1.7 billion. The offer represents an 18% premium on Monday’s closing price.

The boards of both companies said the deal was “strategically compelling” and promised to deliver cost savings, growth, and value for investors.

National Express said the tie-up would reap cost savings worth £35 million. Money will be saved by sharing depots and IT costs, and the greater buying power of the combined business.

The deal is likely to involve job losses but a source close to the company suggested layoffs would be small in relation to overall headcounts. Stagecoach employs 24000 people in the UK, with 4000 in London. National Express employs 48000 worldwide.

National Express said the deal would help accelerate growth of businesses like private hire coaches and corporate office shuttle services by tapping into Stagecoach’s strong regional network.

Stagecoach shares rocketed as much as 20% on news of the approach. National Express rallied 5.2%. The share movement meant the bid for Stagecoach was worth around £480 million.

Deal talks are understood to have been ongoing in secret for months.

National Express operates coaches and airport transfer services in the UK, US, Spain and Morocco. It is best known in London for its shuttles to Gatwick and Heathrow.

Stagecoach is the UK’s biggest bus operator, with more than 8000 vehicles operating across the UK.

UBS said the terms of the deal meant there was “significant scope” for Stagecoach investors to benefit from the growth of the combined business. Analysts at the bank predicted National Express shares could rally 55% from here.

Analysts at Jefferies said the deal was “financially attractive” but cautioned: “We think investors will have questions around competition approval, future regional bus growth and the coach opportunity rationale.”

Merger talks follow a tough pandemic period for both businesses as lockdowns brought travel to a halt.

Stagecoach reported a slide in profits in June and warned it would be “some time” before demand recovered. Both firms have seen their market values cut in half since the start of the pandemic.

Stagecoach founders Sir Brian Souter and sister Dame Ann Gloag said in April they wanted to reduce their stake from a quarter to 5% over the next decade, sparking speculation that the business could be sold.

Stagecoach chair and ex-National Express COO Ray O’Toole has been lined up to chair the combined business. National Express CEO Ignacio Garat will remain in charge.

National Express rejected a £1.7 billion takeover offer from Stagecoach in 2009. The fortunes of both companies have since reversed.

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