26 January 2022

Competition watchdog probes National Express and Stagecoach tie-up

26 January 2022

The £1.9 billion merger between National Express and Stagecoach is being investigated by the UK’s competition watchdog, it has been announced.

The Competition and Markets Authority (CMA) said it has served a so-called initial enforcement order in a move that stops the firms from combining operations or selling off any UK businesses while it probes the deal.

The two companies agreed an all-share merger last month to create a group worth about £1.9 billion with a fleet of around 40,000 vehicles and a workforce of 70,000 people.

Effectively a takeover by National Express, the terms of the deal will see its shareholders own around 75% of the combined group and Stagecoach shareholders around 25%.

The merger, which will be voted on by shareholders, values Stagecoach at around £437 million.

Stagecoach said the CMA’s decision to step in will delay the planned sale of parts of its inter-city coach businesses to ComfortDelGro Corporation Limited.

It added that the CMA wants to “maintain the businesses in their current shape” as it prepares to launch an initial investigation.

But it said the merger partners continue to believe the coach sell-off will be a “comprehensive solution to any competition concerns that might arise from their overlapping coach operations”.

It said the firms “will engage with the CMA to allow the Stagecoach coach disposal to complete as soon as possible”.

In a bid to appease expected competition concerns, Stagecoach last month revealed deals to offload the marketing, retail and customer service operations of Megabus UK and the South West Falcon coach service, as well as its 35% stake in the Scottish Citylink Coaches joint venture.

Stagecoach said: “We do not expect the IEO (initial enforcement order) to materially affect the day-to-day operations of either National Express or Stagecoach, and the parties will continue to work with the CMA in relation to its review of the combination.

At this stage, the boards of National Express and Stagecoach continue to expect the combination to complete around the end of 2022

“At this stage, the boards of National Express and Stagecoach continue to expect the combination to complete around the end of 2022.”

The merger comes as both firms have been hit hard by the pandemic, with passenger numbers slumping due to lockdowns, remote working and a switch away from public transport.

Government support to help transport firms through the crisis is also due to end soon.

The two companies outlined plans to save at least £45 million in annual costs following the merger.

This is set to see around 50 roles cut across their head offices, IT and corporate departments, as well as some overlapping senior management positions.

The merger follows a previous attempt at a deal in 2009, when National Express rejected a £1.7 billion approach by Stagecoach.

National Express has bus and coach networks across the UK and Spain, while it also runs school bus services in America and a rail franchise in Germany.

Stagecoach is UK-focused and is Britain’s biggest bus and coach operator.

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