Stagecoach has confirmed takeover talks by rival National Express in a move that would bring together two of the UK’s biggest transport groups.
Under the terms of the possible all-share tie-up, National Express would own around 75% of the combined group and Stagecoach shareholders around 25%.
The deal would value Perth-based Stagecoach at £445 million.
It comes after both firms have been hit hard by the pandemic. Passenger numbers have fallen due to lockdowns, remote working and a switch away from public transport.
Potential merger benefits
The groups have outlined plans to slash costs as part of the potential merger.
National Express expects to find annual savings of at least £35m, with around 25% by the end of the first year.
If the talks lead to a deal, the combined group would see Stagecoach chairman Ray O’Toole become chairman.
National Express boss Ignacio Garat would be chief executive of the enlarged group.
National Express has bus and coach networks across the UK and Spain. It also runs school bus services in the US and a rail franchise in Germany.
But Stagecoach is UK-focused and Britain’s biggest bus and coach operator.
National Express said the deal would allow it to use Stagecoach’s depot network to run and maintain its coach operations.
It said it would allow it to expand its new growth initiatives – such as private coach hire, corporate shuttle and accessible transport – across Stagecoach’s UK operations.
Stagecoach and National Express merger history
The talks come after National Express rejected a £1.7 billion merger deal first mooted by Stagecoach in 2009.
This former attempt at a merger between the two would have seen Stagecoach own the majority of the combined group, with National Express left with up to 40%.
The two firms stressed that talks are ongoing and that there is no certainty a formal offer will be made.
National Express has until October 19 to make a firm offer or walk away, under City Takeover Panel rules.
Last week Stagecoach unveiled plans to invest more than £20 million in a new fleet of electric buses.
It also intends to create 80 jobs at a new customer contact centre in Perth, due to open in spring 2022.
Stagecoach was founded in 1980 by Sir Brian Souter and his sister, Dame Ann Gloag.
In the past decade it has invested more than £1bn in 7,000 new greener vehicles.
National Express ran Xplore Dundee until last December when it was sold to McGill’s Buses.
Shares in Stagecoach soared nearly 27% to 86.4p on news of the takeover talks, while National Express saw its stock surge more than 10% before easing off to close up around 7.6% at 240.4p.
Susannah Streeter, senior investment and markets analyst at stockbroker Hargreaves Lansdown, said the talks were a surprise.
She added: “The pandemic blew out the tyres of their business models. It’s been such a slow road back to health ever since.
“It comes as little surprise that rivals National Express and Stagecoach are now considering getting together to try and shoulder the recovery together.
“Consolidation in the hard-hit travel sector has been expected. It appears the bus coach and rail business is ripe for restructure.”