National Express buys £470m Stagecoach with shares

Brian Souter

National Express Group Plc said on Tuesday it agreed to buy Perth-based transport rival Stagecoach Group Plc in an all-share transaction worth about £470 million.

Following completion of the deal, Stagecoach shareholders would own 25% and National Express shareholders would own 75% of the combined group.

Stagecoach shareholders would receive 0.36 new National Express shares for each Stagecoach share, which would value the Perth firm at about £470 million, based on the National Express share price on Tuesday.

Stagecoach founders Brian Souter and his sister Ann Gloag still own about 25% of the Perth firm — and would hold about £117 million of National Express shares if the deal closes.

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

Stagecoach shares rose about 9% on Tuesday’s news to around 82p to give it a stock market value of about £452 million — but the stock has lost about half of its value since the start of 2020.

The companies said that it “cannot be ruled out at this stage that the combined group may be required to take remedial action” to obtain the Competition and Markets Authority’s prior approval of the combination “including the divestiture of businesses, assets or property belonging to the combined group.”

Stagecoach said it agreed to sell “the marketing, retail and customer service activities of three of its inter-city coach businesses to ComfortDelGro Corporation Limited” for £8.75 million.

The disposals are: Stagecoach’s 35% interest in Scottish Citylink Coaches Limited; the UK Megabus business which markets and retails inter-city coach services in England and Wales; and Falcon South-West, which markets and retails tickets for a single coach route between Plymouth, Bristol and Bristol Airport.

National Express and Stagecoach said in a stock exchange statement: “The boards of National Express and Stagecoach are pleased to announce that they have reached agreement on the terms of a recommended all-share combination of National Express and Stagecoach, to be effected by means of a court sanctioned scheme of arrangement of Stagecoach under Part 26 of the Companies Act 2006 …

“The combination will create a leading multi-modal transportation provider in the UK market, whilst maintaining a diversified international portfolio of bus, coach and rail services.

“The combined group is expected to have a fleet of around 40,000 vehicles, a workforce of approximately 70,000 people, and with more than a billion passenger journeys made annually on its services.

“The boards of National Express and Stagecoach believe that the combination is a highly compelling strategic proposition, with significant growth and cost synergies delivering strong value creation for both sets of shareholders as well as substantial benefits to the customers, employees and other stakeholders of both National Express and Stagecoach.”

Stagecoach chairman Ray O’Toole would become chairman of the combined group.

Ignacio Garat and Chris Davies, CEO and CFO respectively of National Express, would become CEO and CFO respectively of the combined group.

The companies said: “The board of the combined group will comprise a combination of National Express and former Stagecoach directors, approximately in proportion to the expected pro forma ownership of the combined group. 

“Gregor Alexander and Lynne Weedall, currently independent non-executive directors of Stagecoach, will join the board of the combined group and become chairs of the combined group’s audit committee and remuneration committee respectively.

Tom Stables, CEO of National Express UK and Germany, will become CEO of UK and Germany for the combined group.

“Carla Stockton-Jones, UK managing director of Stagecoach, will become the managing director of UK Bus for the combined group.”

National Express CEO Ignacio Garat said: “The proposed combination of National Express and Stagecoach, and the unique strengths of both companies and their teams, will create a leading multi-modal passenger transport business in the UK, aiming to deliver superb services to customers and forging the way to a carbon free future with a new generation of zero-emission buses and coaches.

“The combined group will also benefit from the significant growth and cost synergies and a stronger balance sheet to significantly accelerate growth investment across our diversified international portfolio, aiming to deliver attractive sustainable returns to shareholders.”

Stagecoach CEO Martin Griffiths said: “Our companies have a shared vision around helping to build more sustainable communities and secure a net zero future.

“We also both have a strong track record of investing in our people and in our services to deliver sector-leading customer service, operational excellence and great value travel.

“This is an exciting opportunity to bring together two of the UK’s iconic transport brands to create a strong, diverse business that is well-placed to grow the market for greener and smarter public transport for the benefit of all stakeholders.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.