09 March 2022

Stagecoach agrees rival £595m takeover in blow to National Express merger plans

09 March 2022

Transport firm Stagecoach has backed a £595 million takeover by German investment group DWS, scuppering plans by National Express for a £1.9 billion tie-up with the bus giant.

Stagecoach said it is recommending a rival higher bid by investor DWS Infrastructure for 105p a share in cash and has ditched its support for the National Express offer.

Shares in the bus group surged by nearly 40% on the takeover U-turn, with the DWS bid marking a significant improvement on National Express’s offer, which valued Stagecoach at around £470 million.

Stagecoach agreed to the National Express deal in December, which would have seen its shareholders take a 25% stake in the enlarged group.

But since then, the Competition and Markets Authority (CMA) launched an investigation into the deal and served a so-called initial enforcement order in January stopping the firms from combining operations or selling any UK businesses while it carries out the probe.

Stagecoach said the DWS bid offers greater certainty for investors and employees, with only a “very small” number of head office staff set to be affected and no changes expected to frontline workers and drivers.

It will also keep its headquarters in Perth under the deal.

The National Express merger was expected to see around 50 roles cut across the head offices, IT and corporate departments of the two firms, as well as some overlapping senior management positions, while the head office was set to move from Perth to Birmingham.

Stagecoach added the new deal will also provide continuity at the top, with senior bosses – including chief executive Martin Griffiths – set to remain in post.

Under the National Express deal, National Express chief executive Ignacio Garat would have taken on the top role within the merged firm.

Speaking to the PA news agency, Mr Griffiths said the deal with DWS was “positive for employees and creates more certainty”.

He added it would have been a “long and quite arduous process” with the CMA on the National Express deal.

Mr Griffiths said the offer from DWS “presents a major opportunity to maximise the significant growth potential ahead”.

The DWS offer marks a 37% premium to Stagecoach’s closing share price of 76.55p on Tuesday and significantly tops the National Express offer, which was worth 69.34p a share.

National Express – which also saw shares lift nearly 10% on news of the rival DWS bid – called on investors to “take no action” and said it would make a further announcement in due course.

DWS already has a number of long-term infrastructure investments in the UK, such as Yorkshire Water owner Kelda and Peel Ports, as well as in other European transport groups, including Belgian public bus operator Hansea.

Hamish Mackenzie, head of infrastructure at DWS, said: “As a long-term investor in essential services with a strong track record in the UK and European transport sectors, DWS Infrastructure will back Stagecoach to rapidly capitalise on the growth opportunities presented by increased public and private investment in UK bus and coach.”

Jefferies analyst Becky Lane said: “Stagecoach’s new offer is materially higher than National Express’, despite limited synergies.

“We thought the National Express merger was financially attractive, but share price performance suggests investors may have needed more convincing strategically.”

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