Stagecoach joins race to take over National Express

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Under-siege National Express was today facing more bid interest amid speculation that Stagecoach will join the race for the rail group.

The South West Trains firm is considering whether to trump the 600 million offer expected from Spain's Cosmen family and private equity's CVC.

According to the Sunday Times, Stagecoach has appointed Deutsche Bank to draw up plans for an all-share takeover offer. The tie-up would create a group with a significant share of UK transport markets and a strong presence in America.

The bid interest in National Express – which is set to lose its loss-making East Coast rail deal after failing to renegotiate the franchise – began earlier this month with interest from FirstGroup.

The UK's biggest transport group walked away last week, just as it emerged that the biggest shareholder in National Express – the Cosmen family – had joined forces with CVC to table a proposal. A formal offer could come this week.

Today's report said Deutsche Bank has been working on a Stagecoach bid for some weeks, well before the Cosmen interest became public.

If it does not make an offer for the entire company, Stagecoach may yet benefit as the Cosmens and CVC might not be interested in retaining National Express's UK rail franchises and could attempt to hand them on.

Cash-strapped National Express, which is due to announce half-year figures on Thursday, had been contracted to run the East Coast franchise until 2015, but saw passenger growth stall in the recession. The deal lost 20 million in the first half of this year.

As a result of handing over the East Coast franchise, it has been warned it could lose its two other rail franchises – East Anglia and commuter service c2c.

It also emerged today that Sir Richard Branson's Virgin Trains – a joint venture with Stagecoach – was mulling over a bid for the East Coast franchise.

Sir Richard told the Sunday Telegraph that he would bid for the line when it comes up for tender, expected to be late next year, if the Government makes changes to the franchise system.

Virgin lost out on two previous occasions for the East Coast line, most recently in 2007 when National Express bid 1.4 billion to win the franchise until 2015.

Sir Richard wants future bidding processes to take into account previous rail performance, future investment programmes and for the franchise period to be longer to spread the risk.

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