Pressure grows on National Express as activist shareholder wins backing

Elliott, which has been urging National Express to seek a merger deal in the UK and to expand more aggressively in the US, is proposing three non-executive directors for election at the annual general meeting on 10 May.

The US hedge fund said it expected the Cosmen family, which owns more than 17 per cent of the company, to vote in favour of the resolutions it has tabled for next month's meeting.

"Elliott has had a number of discussions with representatives of the Cosmen family in relation to its proposals to appoint three new directors to the board of National Express," said a spokesman for the US firm. "Based on those discussions, Elliott expects that the Cosmen family and its nominees will vote their shares in favour of the resolutions."

National Express said it continued to urge shareholders to vote against Elliott's resolutions, which it claims are "an attempt to circumvent best corporate governance practice".

But with the two shareholders holding a combined stake of almost 35 per cent, Cosmen's involvement significantly raises pressure on the board. Elliott needs 50 per cent of votes from shareholders to push the resolutions through.

The Cosmens themselves were behind their own activist campaign at the group in 2009 after National Express lost the East Coast Main Line rail franchise.

The family had later backed a 500p-a-share offer from Perth-based transport group Stagecoach and private equity group CVC, which was eventually dropped.

Elliott, which began building its stake when the company staged a 360 million emer-gency rights issue 18 months ago, has said it was impressed by the turnaround of the business by chief executive Dean Finch.

But in a recent letter to National Express shareholders it said its candidates for the board would provide "fresh impetus and thinking" and believes the company should be more pro-active in its assessment of potential deals.

It plans to vote against the re-election of current director Roger Devlin in a board overhaul that would also see the appointment of banker Javier Canosa, entrepreneur Marc Meyohas and former Swissair logistics boss Chris Muntwyler.But National Express has put up a staunch defence, calling on its shareholders to reject the Elliott resolutions and said it was already working on plans to appoint additional non-executive directors to represent the interests of all shareholders.

National Express chairman John Devaney said the FTSE 250 company felt strongly that all candidates should participate in a recruitment process managed by the nomination committee of the board.

Analysts from Oriel Securities said: "It is unhelpful for a long-term shareholder to be at odds with the executive board, especially when the turnaround plan is, if anything, delivering results faster than originally expected."

Shares in National Express yesterday closed up 4.5 per cent at 250.1p.