National Express (LSE: NEX) said this morning that it does not intend to explore the possibility of a combination with Stagecoach Group (‘Stagecoach’)(LSE: SCG). The company has been subject to several protracted discussions with several parties in recent months as it has explored options to reduce debt and maintain compliance with its banking covenants beyond December 2009.
National Express previously held discussions with a private equity group which had the support of several major shareholders of the company. In September, a consortium comprising CVC Capital Partners and Spain’s Cosmen family tabled a second proposal to buy the train, bus and coach operator for £5.00 per share.
In separate negotiations the CVC group were discussing the subsequent sale of certain National Express assets and operations to competitor Stagecoach. However earlier this month, National Express confirmed that the CVC Capital Partners private equity group has decided not to make an offer for National Express.
After the CVC deal fell through, National Express received a highly preliminary proposal from Stagecoach to acquire the Group in an all-share transaction, with National Express shareholders owning no more than 40% of the enlarged group.
Today the company announced that following an evaluation of the value and certainty of the Stagecoach Proposal, the Board, together with its advisers concluded it is unlikely that a combination with Stagecoach could be successfully executed in 2009. As such National Express has now ceased discussions with Stagecoach and has confirmed with the Panel on Takeovers and Mergers it is no longer in an ‘offer period’.
The Group will now aim to secure the additional equity funding it requires before the end of 2009, through the perusal of the previously announced rights issue. It believes it is in shareholders' best interests that an equity fundraising be undertaken as soon as possible, a further announcement regarding the fundraising during the course of November.
In a separate statement this morning Stagecoach noted its disappointment over National Express’ decision.
Stagecoach believes there was a “compelling strategic and financial proposition” for a combination and it claimed to be confident that such a transaction was deliverable and that such a transaction could have been financed within an appropriate timeframe.
In light of the stance taken by National Express, Stagecoach also confirmed that it will not make an offer for National Express within six months from 3rd September 2009.