£445m price tag
National Express in talks to acquire Stagecoach
Stagecoach shareholders would own 25% of the group
National Express has confirmed that it is negotiating a takeover of Stagecoach in an all-shares deal that values the Scottish firm at £445 million.
Under the terms of the proposed deal Stagecoach shareholders would receive 0.36 new National Express ordinary shares for each Stagecoach ordinary share.
The boards of Stagecoach and National Express said they believe that combination would be a “strategically compelling proposition” with the potential to realise significant growth and cost synergies, as well as delivering strong value creation for both sets of shareholders.
They say it would enhance its ability to invest in an “attractive and diversified” pipeline of high-return growth opportunities in North America and ALSA.
The terms imply a premium of 18% based on the respective closing price of Stagecoach shares last night and 17.6% based on respective last six month volume weighted average share prices.
The board would be made up in proportion to the new ownership structure with Ray O’Toole becoming chairman, leveraging his prior experience across both businesses, and Sir John Armitt stepping down as chairman of National Express, a role he has held since February 2013.
Jorge Cosmen would be deputy chairman, and Ignacio Garat and Chris Davies would be CEO and CFO respectively. There was no word on any role for Stagecoach CEO Martin Griffiths.
Stagecoach founders Sir Brian Souter and Dame Ann Gloag have been reducing their shareholdings in the company. Sir Brian said in April that he would be happy to remain a non-executive at the firm.
AJ Bell investment director Russ Mould said: “It’s pitched as a merger, but it is clear which party will be in control. National Express is trying to buy Stagecoach, plain and simple.
“The benefits of parking the two businesses together include operating synergies, economies of scale and a bigger footprint for National Express in growth areas such as private coach hire and corporate transport.
“The starting gun on Stagecoach being a bona fide takeover target was fired in April when founders Sir Brian Souter and his sister Dame Ann Gloag sold just over 2% of the business.
“This was part of a plan to reduce the family ownership from 27.1% to 5% over the coming decade. In doing so, they have removed a major hurdle for any would-be suitor by declaring their intention to sell down the bulk of their holding.
Sir Brian Souter and his sister are selling shares in Stagecoach (pic: Terry Murden)
“While the pair still have a significant stake, their willingness to start selling down should make it easier for National Express to convince them to accept its all-share offer.
“The competition authorities might have something to say about the two public transport operators coming together, but otherwise the deal looks fairly sensible.
“The fact that Stagecoach’s board have called it a ‘strategically compelling proposition’ would also suggest talks are friendly.
“A key factor to consider is whether someone else might fancy owning Stagecoach, such as an overseas transport operator. It is not an easy feat to build up a large position in the UK public transport market and Stagecoach now has 8,400 buses and coaches.
“There may be some nervousness around using public transport at present due to the lingering pandemic, but long term it seems inevitable that buses will remain a vital part of the UK’s transport network.
“Stagecoach has a key position in various parts of the country including places like Manchester where companies continue to expand, thereby pushing up employment and with it demand for commuter services.”