National Express has confirmed that it is considering making an offer to buy Stagecoach. If completed, the deal will deliver “significant operational efficiencies across the combined networks” and accelerate the expansion of National Express’s key growth sectors, including into the corporate, shuttle and private hire coach market, it says. Combination of the two groups would also position the resulting business well in an evolving bus industry landscape.
Under the terms of possible all-share combination, Stagecoach shareholders would receive 0.36 new National Express ordinary shares for each Stagecoach ordinary share. That would result in them owning approximately 25% of the combined group.
National Express has until 19 October to either announce a firm intention to make an offer for Stagecoach or to withdraw, although that deadline can be extended. Any deal would be subject to regulatory and merger control approval.
In a statement, National Express says that combining the two businesses would, among other things, accelerate the expansion of its National Express Transport Solutions (NETS) business, along with its accessible transport operation, “across Stagecoach’s UK footprint.” NETS was launched in July 2020 with a bullish message that it would “stand apart from the rest of the market.”
In addition to delivering growth potential via NETS and in the accessible sector, National Express says that the potential combination of the two businesses would enable its scheduled coach operation to improve efficiencies through use of Stagecoach’s depot network for operations and vehicle maintenance.
National Express believes that if the deal is completed, 25% of expected cost synergies would be achieved by the end of the first year, 85% by the end of the second year and the full pre-tax run rate of at least £35m by the end of the third year.
Those savings would be split approximately equally across network efficiencies and optimisation; shared operational best practice; and through additional savings such as rationalisation of shared costs and the non-depot footprint.
Should the deal be completed, it is envisaged that Ray O’Toole would become Chair of the combined group. Current Chair of National Express Sir John Armitt would step down. Jorge Cosmen would be Deputy Chair of the combined group while National Express’s present Chief Executive Ignacio Garat would hold the same position in the combined business, with Chris Davies as Chief Financial Officer.