National Express shareholders urged to defy US hedge fund over directors

National Express chairman John Devaney has hit back at the American hedge fund intent on engineering a sell-off of the British transport firm, urging shareholders to vote down its attempt to install three directors.

In a letter to shareholders yesterday, Devaney said the move by investment firm Elliott International went against the provisions of the UK corporate governance code, which stipulates that there should be a "formal, rigorous and transparent procedure" for board appointments.

He said: "To seek to appoint new non-executive directors outside of a formal process, particularly when such a process is already under way, is, in the view of the board, an attempt to circumvent best corporate governance procedures and I strongly encourage shareholders to resist this."

Elliott, part of Paul Singer's 17 billion New York-based hedge fund, owns a 16.3 per cent stake in National and recently suggested that it should be sold, merged into a larger group or broken up.

Candidates to buy the firm, or its UK assets, would be likely to include Scottish rivals Stagecoach and FirstGroup, as well as foreign transport operators such as France's SNCF.

Elliott, which bought most of its stake in the 360 million rescue fundraising by National following the loss of its East Coast rail franchise in 2009, said it was impressed by the recent turnaround of the business.

But it still plans to vote against the re-election of current director Roger Devlin, proposing instead a shake-up that would also see the appointment of banker Javier Canosa, entrepreneur Marc Meyohas and former Swissair logistics boss Chris Muntwyler.

Elliott said the trio were selected using headhunters and had no direct connection to it. To succeed, the American investor needs 50 per cent of votes from shareholders to be in favour of the resolutions at National's AGM in London on 10 May.

It is not known whether it has the support of Spain's Cosmen family, the group's largest shareholder.

In 2009, the Cosmens made public their dismay that National Express rejected a 1.6bn merger with Stagecoach.

That came just weeks after the Cosmens and private equity group CVC had walked away from a possible takeover of the transport group.Yesterday, Devaney gave Devlin his full support, saying he was "highly effective and independent" and urging shareholders to back him.

He added that recent accounts showed the company was now a "high-quality business, focused on its core operations".

He continued: "The board and management have worked closely together to agree and execute a clear strategy that will deliver significant long-term growth for all shareholders."

Elliott, noted for its aggressive break-up of investment trusts in the late 1990s, has also targeted Alliance Trust. It recently acquired a 3 per cent stake - worth 72 million - in the Dundee-based trust, which is already facing calls for a share buy-back scheme from other investors.