Perth-based Stagecoach said it has signed an agreement of principles with the Cosmen-led consortium which would see the latter retain the UK coach operation.
The Government has told Stagecoach that it will take over the Scotland to London East Coast Mainline rail franchise this year, after National Express stop funding it.
But the Department for Transport has stepped back from its threat to take over National Express’s other rail businesses, East Anglia and London commuter line C2C, in the event of a takeover.
The consortium, comprising National Express’s largest shareholder the Cosmen family and CVC, yesterday raised its indicative cash offer for the group to 500p a share.
National Express said it is evaluating the latest proposed offer.
Its shares soared 53.9p or 13.1% to 465.9p.
CVC-Cosmen said the proposal was now final, and must be recommended by the National Express board or it would be withdrawn.
The deal is at a 81% premium to National Express’s share price before it was revealed an approach by FirstGroup and 21% above the company’s closing share price on Wednesday night.
The consortium has been given until September 11 by the Takeover Panel to table a firm offer.
Stagecoach said yesterday it is confident that it can finance the deal although a spokesman said the company would not discuss the details of the arrangement.
It is understood that the £1bn debt pile that has been weighing on National Express would remain with the Cosmen consortium.
Stagecoach confirmed yesterday that it is not planning its own bid for National Express.
Taking over the National Express bus businesses, which are focused on the West Midlands and Dundee, would add 1900 more buses to Stagecoach’s 7000-strong fleet. But it is likely to sell operations in Warwickshire and Stagecoach Strathtay to avoid competition worries.
Panmure Gordon analyst Gert Zonneveld said the deal would play to the strengths of Stagecoach, whose shares closed up 15.1p or 11.5% at 145.9p yesterday.
He said: “Stagecoach’s market share is low enough to allow it to take its largest competitor. They have little position in the West Midlands.”
Fundamentally, I think that Stagecoach’s business has a lot of potential. Stagecoach has demonstrated it is one of the best, if not the best, operator of bus services in driving growth and increasing margins and I think they can do it better than anyone.”
The National Express bus business has a profit margin of just 7%, half that of Stagecoach’s bus business.
The two rail franchises are notably smaller than Stagecoach’s flagship South Western commuter line which takes 162m passengers into London every year.
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