Stagecoach takeover talks ongoing as buses recover

Perth-based Stagecoach Group plc, Britain’s biggest bus operator, said on Tuesday it is still in talks to be taken over by National Express Group Plc and that its regional bus operations have been recovering in recent weeks, with journey numbers in excess of 70% of equivalent 2019 levels by the end of September.

National Express Group announced on September 21 it was in talks to buy Stagecoach in an all-share deal that would value the Scottish transport firm at about £445 million.

Stagecoach founders Brian Souter and his sister Ann Gloag announced in April a 10-year plan to reduce their shareholdings in the firm from 27% to 5% — a move that some analysts viewed as paving the way for a takeover.

National Express has until October 19 to announce a firm intention to make an offer for Stagecoach or walk away.

Under the terms of the potential combination, it is expected that Stagecoach shareholders would receive 0.36 new National Express ordinary shares for each Stagecoach ordinary share, resulting in them owning approximately 25% of the combined group.

Stagecoach chair Ray O’Toole — a former chief operating officer at National Express — would become chair of the combined group, with National Express Group CEO Ignacio Garat becoming CEO of the merged firm and National Express Group CFO Chris Davies becoming CFO of the combined group.

In a trading update, Stagecoach said: “On 21 September 2021, we announced that the group was in discussions with National Express Group plc in relation to a possible all-share combination. 

“Discussions between the parties and reciprocal customary due diligence remain ongoing and there can be no certainty that any offer will be made.”

On its regional bus business, Stagecoach said: “Passenger demand for our regional bus operations has been recovering in recent weeks with the return of schools and universities across the country, with journey numbers in excess of 70% of equivalent 2019 levels by the end of September.

“We are operating vehicle mileage at around 94% of 2019 levels.

“For the week ended 2 October 2021, journey numbers were 70.1% of the figure for the equivalent period in 2019, fare paying journey numbers were 74.4% and concessionary journey numbers were 60.2%. 

“Commercial sales as a percentage of the 2019 levels are higher than fare paying journey numbers, which is partly attributable to travel patterns during this COVID-19 recovery period, whereby single tickets represent a higher proportion of sales than in 2019, while weekly and monthly tickets represent a lower proportion. 

“We continue to progress a number of ticketing initiatives to reflect the changes we are seeing in travel patterns.

“Governments across the UK continue to make payments to ensure the continuity of bus services as we emerge from the COVID-19 pandemic.

“As anticipated, the COVID-19 Bus Services Support Grant Restart (CBSSG) for local bus services in England, excluding London, came to an end on 31 August 2021.

“The Department for Transport has put in place a £226.5m Bus Recovery Grant (BRG) funding package to cover the period from 1 September 2021 to 15 March 2022.

“We, and other bus operators, continue to work closely with the Department for Transport on the terms and conditions of the scheme, whereby funding is allocated to operators with reference to revenues and mileage operated.

“In Scotland, the COVID-19 Support Grant Restart (CSG) payments for continuing bus services have now been extended through until 31 March 2022.

“We are continuing to seek new opportunities to diversify and grow the business.

“We are pleased to have successfully retained the Rail Replacement contract for London North Eastern Railway following a competitive tender, and continue to actively pursue other UK Rail Replacement bids.

On its rail business, Stagecoach said: “Similar to our local regional bus businesses, our ongoing Sheffield Supertram business is receiving government payments for continuing the essential tram services it provides.

“The Light Rail Revenue Restart Grant (LRRRG) scheme ended on 19 July 2021, and has been replaced by a £56m funding package to light rail operators that runs from 20 July 2021 to April 2022.

“We continue to work with South Yorkshire Passenger Transport Executive and the Department for Transport on arrangements for allocating this funding.”

Stagcoach CEO Martin Griffiths said: “The momentum in passenger journeys and sales reflects a pick up in activity and travel across the UK, and growing confidence to return to public transport. 

“While there remains some uncertainty around how the recovery continues, our outlook for the year ending 30 April 2022 is unchanged from when we announced our full year results in June 2021. 

“Strong partnership working between bus operators, national government and local transport authorities is fundamental to transforming the country’s bus networks and tackling climate change.”