By Scott Wright
NATIONAL Express remained tight-lipped over its next move in the takeover battle for Stagecoach last night as the bus giant reported a narrowing of losses and highlighted a “rapid recovery” in demand for its services since Covid restrictions eased.
Plans by National Express to merge with Stagecoach in a £1.9 billion all-share deal were handed a potentially fatal blow on Wednesday when it emerged that the board of the Scottish transport firm had accepted a cash offer worth £595 million from DWS Infrastructure, a German investment company.
The new offer looks to have scuppered the National Express proposal, which valued Stagecoach at around £475m – on the basis investors in the Scottish company would hold 25 per cent of the shares in the combined business.
The National Express offer, which was agreed in December, is currently subject to a probe by the competition watchdog.
Yesterday, National Express gave no further indication of how it would respond to the DWS bid.
“National Express notes the announcement of a counter-off for Stagecoach,” it said.
“The board of National Express is considering its options, and will update the market in due course.”
Under the offer from DWS, which has investments in infrastructure and transportation assets across Europe, the Stagecoach leadership team, headed by chief executive Martin Griffiths, would continue to lead the business. The Stagecoach headquarters in Perth would be retained, as would head office functions in Stockport and London, while DWS also said the overall headcount in frontline operational roles would be unchanged.
The proposal from National Express would see its chief executive, Ignacio Garat, and finance chief Chris Davies take the helm of the merged company. National Express also proposed basing the enlarged company in Birmingham.
One commentator speculated yesterday that National Express could become a takeover target itself if it loses out in the battle for Stagecoach.
Julie Palmer, partner at business insolvency specialist Begbies Traynor, said: “National Express saw clear signs of recovery as it exited 2021 with the pandemic receding. It was on course to create a transport powerhouse through an all-share combination with Stagecoach.
“This morning, it’s a different story. The Stagecoach tie-up looks to have been run off the road with German investor DWS gate-crashing the deal with a higher offer.
“National Express’s management must now [be] wondering where they can find efficiencies as they face rising costs and a cash-strapped public cutting back on spending.
“One has to question where they will go next but with plenty of private equity interest in the sector, they could soon find themselves a bid target, rather a bidder.”
In financial results published yesterday, National Express reported a statutory loss before tax of £84.9m for the year ended December 31, which the company said was a £359.8m improvement on the year before. Revenue increased to £2.17bn from £1.96bn amid a “strong recovery” in demand for services as lockdown restrictions eased. Most of its businesses returned to 80% or more of “pre-pandemic patronage at peak” last year, the company said.
National Express, which runs bus and coach businesses in Spain, Morocco and North America, noted it had benefited from cost-saving actions that it said had permanently removed £100m of annualised costs.
Mr Garat said: "It was very encouraging to see that as restrictions lifted, we saw a rapid recovery in demand for our services and I am delighted to report a return to positive underlying operating profit and free cash flow. I anticipate further strong recovery in demand over the coming year.”
Mr Garat underlined the company’s commitment to reducing the emissions of its fleet, with targets including zero emissions for its UK bus and coach businesses by 2030 and 2035.
He signalled the company’s intention to reinstate “consistent dividend payments starting with a dividend for full year 2022”.
Shares closed down 3p at 238.8p.
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