FirstGroup drops plans for National Express merger

Published on Wednesday 22 July 2009 21:35

FIRSTGROUP, the Aberdeen-based transport giant, has shelved plans to merge with rival National Express because of uncertainty over the future of the east coast rail franchise.

On 19 June, First confirmed it had approached National Express about a friendly merger.

The approach was rebuffed, but the Scots company said at the time that it believed there were strong synergies to be gained from combining the businesses.

Last night, in a statement released after the Stock Exchange had closed, the company said National Express had asked the UK Takeover Panel to give First a "put up or shut up" deadline to declare whether it would table a firm bid.

First said that while it believed a merger would have created a major player "able to compete more effectively across the European and North American markets", "uncertainties" meant it was "inappropriate" to pursue a formal bid at the moment.

On 1 July, the Department for Transport said it would strip National Express of the east coast franchise, which runs from London to Edinburgh, after the company admitted it was likely to miss payments owed to the government.

First said a recommendation from the National Express board would also have been required "to ensure the maximum benefits of a combination would accrue to the combined group's shareholders".

Sir Moir Lockhead, First's chief executive, said he still believed a merger would have been a "compelling" proposition for shareholders.

"Our intention was to enter discussions with a view to seeking a recommended merger that would create a significant British transport group, in a stronger position to compete with state run companies across Europe," he said.

"We believe this combination would have offered a highly compelling proposition to both sets of shareholders."

The company is now barred from bidding for National Express for at least six months, unless a rival bidder emerges.