National Express in talks to acquire 100% of Stagecoach

Parked buses are seen at a Stagecoach depot in South Shields as the spread of coronavirus disease (COVID-19) continues, South Shields, Britain April 3, 2020. REUTERS / Lee Smith

  • Stagecoach shareholders to own 25% of the merged group
  • Potential deal would value Stagecoach at 445 million stg
  • Stagecoach shares jump 20%, National Express 7%
  • Companies say there is no certainty a formal offer will be made

LONDON, Sept. 21 (Reuters) – UK transport company National Express (NEX.L) is in talks to acquire competing operator Stagecoach Group (SGC.L) under a profit-sharing deal, providing opportunities for savings and supporting their recovery from COVID -19.

The merger, which would value Stagecoach at around 445 million pounds ($ 609 million), comes as government support to help businesses weather the pandemic is set to expire.

National Express operates buses and coaches in Spain and Great Britain, operates school buses in the United States and has a German rail contract.

Stagecoach, focused solely on Great Britain, is the country’s largest bus and coach operator. The company was founded by Brian Souter and his sister Ann Gloag in Perth in 1980, initially with just two buses purchased with their father’s dismissal money.

They still own stakes in the company – Souter owns around 14.55% and Gloag around 10.47%, based on data from Refinitiv.

Under the possible takeover, Stagecoach shareholders would receive 0.36 new National Express shares for each Stagecoach share, which would give them a 25% stake in the merged group.

This represents an 18% premium on the closing price of Stagecoach shares on Monday.

Stagecoach shares jumped 20% to 81 pence at the start of trading on Tuesday. National Express rose 7% to 239 pence a share, giving it a market value of £ 1.48 billion.

During the pandemic, Stagecoach and National Express received government support to keep services running when passenger numbers were down, but that funding will end in the coming months.

Transportation use is starting to pick up as workers return to the office, but is still not close to pre-pandemic levels.

The companies said the combination would deliver pre-tax cost savings of £ 35m per year from efficiency gains such as National Express using Stagecoach depots for its coach operations.

Stagecoach operates the megabus service, which like National Express operates coach services between UK cities.

Citi analysts said the deal would be positive for the transportation industry. Rival UK operators FirstGroup (FGP.L) and Go-Ahead (GOG.L) also rose around 3% following the news of the potential deal.

“We have argued for consolidation in UK public transport given the structural challenges facing the industry, namely the impact of the pandemic on passenger volume and headwinds associated with the adoption of environmentally friendly vehicles, ”Citi said in a note.

The companies said discussions and due diligence were ongoing and there was no certainty about a formal offer.

If a deal were made, Stagecoach chairman Ray O’Toole, former COO of National Express, would become chairman of the combined group, while National Express chief executive Ignacio Garat would remain the entity’s CEO. merged. ($ 1 = 0.7310 pounds)

Reporting by Sarah Young; Editing by Kate Holton, Michael Holden and Jane Merriman

Our Standards: Thomson Reuters Trust Principles.

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