National Express takeover derailed

Published on Friday 16 October 2009 21:29

A POTENTIAL £765 million takeover of National Express came off the rails yesterday, but the possibility was left open of Perth-based Stagecoach striking a separate deal for the ailing transport group's UK bus and rail arm.

Almost 250m – or a third – was wiped off the value of National at one stage as a consortium of Spain's Cosmen family and private equity giant CVC Capital Partners pulled the plug on a bid.

The U-turn rocked the City as the Cosmens, who own 18.5 per cent of National, and their partner had spent a month poring over the target's books. Jorge Cosmen is also National's deputy chairman.

Last month, the consortium approached the struggling company with a proposed offer worth 500p per share, an improvement on a previous 450p approach.

However, at the 11th hour yesterday they folded the bid approach. Instead, they said they would support a planned stock-market fundraising by National "within certain parameters that the Cosmen family has communicated to the board of National Express".

As part of the now-derailed deal, Stagecoach had been set to buy National's profitable East Anglian and c2c London commuter franchises as well as the company's bus division.

Stagecoach said yesterday that it was no longer in talks with the consortium about a possible acquisition of those assets.

However, sources said a separate deal could not be ruled out between National and Stagecoach, which is headed by Brian Souter.

"Souter would still consider this a good deal if the numbers stacked up and National was willing to sell," one source said.

Douglas McNeill, transport specialist at broker Corporate Synergy, said: "The odds on that are high. Stagecoach will not regard the assets as less attractive today than they were yesterday. It will continue to covet them."

One leading fund manager said: "Stagecoach has done all the work on this. I think if National decides it needs to sell a business or two, as well as the rights issue to address nearly a billion quid of debt, Stagecoach would be interested, particularly in National's UK bus operations where there would be a lot of upside."

Stagecoach's bus profit margins are seen as industry-leading at about 15 per cent compared to about 8 per cent at National.

National, which has been without a chief executive since Richard Bowker quit for a lucrative Middle East job this summer, said yesterday that a fundraising was "now the most appropriate course of action" to unlock the value of the group for shareholders. The cash call is thought to be for about 400m.

National is due to hand the loss-making East Coast mainline franchise back to the government before the end of this year. But unions pressed the government to go further yesterday. Gerry Doherty, leader of the TSSA rail union, urged Transport Secretary Lord Adonis to "stop the City cherry-picking the best bits of National Express" and take all three National rail franchises under government control.

National's shares closed down 23 per cent at 362p yesterday.