National Express and Stagecoach in merger talks

The UK’s two leading long-distance coach companies may merge to cut costs, recover from the coronavirus pandemic and tackle fresh competition.

© Simon Calder

Covid response: National Express demonstrates its health protection measures in response to the coronavirus pandemic

– Simon Calder

National Express says it is pursuing an all-share deal with the Stagecoach Group – which is the largest UK bus operator, and whose brands include Megabus.

Both National Express, based in Birmingham, and Perth-based Stagecoach have been hard-hit by the Covid crisis, with complete shutdowns stretching to months. When operations restarted, safety measures kept capacity down.

As they began their recovery, a German competitor, Flixbus, announced it had secured funding of £470m and launched a wide range of UK services – with fares starting at £0.99.

The board of National Express has confirmed it is in discussions with Stagecoach “in relation to a possible all-share combination”.

Stagecoach shareholders would receive 0.36 new National Express ordinary shares for each Stagecoach ordinary share. As a result they would own about a quarter of the combined group.

The deal represents an 18 per cent premium on Stagecoach’s current share price.

A stock exchange announcement from the boards of each company said they believe a merger “would be a strategically compelling proposition with significant growth and cost synergies”. Examples include “National Express Coach utilising Stagecoach’s well-located depot network to run and maintain its coach operations”.

Merging the operations is expected to cost £20m in each of the first two years, with the prospect of saving at least £35m annually within three years.

Sir John Armitt, 75, who has chaired National Express since February 2013, would step down. Stagecoach chairman Ray O’Toole, 64, who is a former chief operating officer of National Express, would become chair of the new group.

The statement added: “There will be no significant impact on the underlying operations of either National Express or Stagecoach.”

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