National Express Seals $630 Million Stagecoach Bus Takeover
(Bloomberg) -- National Express Group Plc agreed to buy rival U.K. bus operator Stagecoach Group Plc in an all-share deal worth about 475 million pounds ($630 million), uniting two of the country’s biggest transport firms.
Stagecoach’s owners will get 0.36 new National Express shares for every one they now own, the companies said Tuesday, after reaching agreement on a plan first disclosed in September. The valuation is based on current stock prices.
Merging with Stagecoach will boost London-based National Express’s share of a British bus market that’s been protected from the worst ravages of the coronavirus outbreak by state support. At the same time it will keep down costs through the sharing of bus depots, routes and office functions as the industry transitions to electric vehicles from a largely diesel fleet.
The enlarged business will “benefit from the significant growth and cost synergies and a stronger balance sheet,” according to National Express Chief Executive Officer Ignacio Garat, who will lead the combined group.
His Stagecoach counterpart Martin Griffiths said in an interview that the transaction is based on “compelling industrial logic” that should have a strong appeal to the company’s shareholders.
Stagecoach stock traded 9.3% higher at 82 pence as of 1:22 p.m. in London while National Express was priced 2% higher at 239.8 pence.
National Express investors will own 75% of the merged group, which will have about 40,000 vehicles and 70,000 staff. The deal represents an 18% premium to Perth, Scotland-based Stagecoach’s closing price Sept. 20, the day before the preliminary offer announcement, which was initially reported by Bloomberg.
The approach for Stagecoach comes after its co-founders, Scottish businessman Brian Souter and his sister Ann Gloag, began selling down a near 30% stake in April and indicated that they wanted to cut the holding to 5% in a decade.
U.K. bus companies are focusing on the challenges and opportunities of moving to all-electric fleets after largely exiting train operations, squeezed out by state-owned European companies with access to cheaper cash.
Griffiths, who plans to leave once the deal wins regulatory and investor approval, most likely late next year, said it’s possible commuter journeys and high street shopping trips will decline permanently in the wake of Covid-19. The impact, though, should though be outweighed by a shift away from cars to public transport as measures to curb emissions take hold.
National Express, the biggest U.K. operator of long-haul coach services and the second-largest school bus provider in the U.S., is in acquisition mode after making former FedEx Corp. executive Garat CEO last year.
The Stagecoach takeover will mark the latest round of dealmaking in the bus industry. FirstGroup Plc agreed earlier this year to sell its U.S. school bus business for $4.6 billion to Swedish investment firm EQT AB, while National Express itself agreed in June to buy Spanish bus group Transportes Rober.
Stagecoach Chairman Ray O’Toole will occupy the same position at the new group, having worked at both firms.
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