£300m cash call as National Express rejects takeover bid

NATIONAL Express Group, the train and bus operator, is seeking to raise between £300 million and £350m in a rights issue after rejecting a takeover approach led by its main shareholder.

Sources close to the situation said the transport group planned to launch its share call after 11 September, when the deadline expires for the bidders to launch a final offer.

The company yesterday said it had consulted major institutional shareholders and had decided that the 450p-a-share takeover proposal – made by 18.6 per cent shareholder the Cosmen family, from Spain, and CVC Capital Partners – undervalued the group.

"Strengthening of the balance sheet through an equity fundraising is the key short-term objective to unlock the inherent value of the group," National Express said, although it would not confirm the range.

Its shares closed down 2.5 per cent, at 398.4p.

A spokesman for the CVC-Cosmen consortium, who declined to comment on the prospects of tabling a higher offer, said: "We note the statement from National Express and are considering our options."

National Express, which is handing back its loss-making east coast main line rail franchise to the government, has been struggling to manage a debt pile of close to 1 billion, built up via a string of acquisitions – notably the Spanish bus operations that brought the Cosmen family on to the board.

One analyst said he would expect the consortium to come back with a higher offer as the Cosmens look to regain control of the family business, sold to National Express in 2005.

The transport group added that the proposed offer had been subject to a number of preconditions, notably the retention of two UK rail franchises that the government would like to take back under state control

The firm said it would give up its flagship east coast franchise earlier this year after running up heavy losses.

Transport Secretary Andrew Adonis said at the time that it was unacceptable for the group to continue to operate in the UK rail industry after giving up a franchise, but National Express thinks it can prove otherwise.

Perth-based rival Stagecoach said last month it was in talks with CVC-Cosmen about potentially taking part of National Express should the consortium's bid for the company succeed.

Stagecoach said yesterday it was witnessing slower revenue growth due to tough market conditions but that it had nothing further to add regarding National Express.