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* Stagecoach shareholders would own 25% in merged group
* Potential deal would value Stagecoach at 445 mln stg
* Stagecoach shares jump 20%, National Express up 7%
* Companies say no certainty a formal offer will be made
(Adds background, analyst comment, share price)
By Sarah Young
LONDON, Sept 21 (Reuters) - British transport company
National Express is in talks to acquire rival operator
Stagecoach Group in an all-share deal, offering scope
for cost savings and underpinning their recovery from COVID-19.
The tie-up, which would value Stagecoach at about 445
million pounds ($609 million), comes as government support to
help the companies get through the pandemic is due to expire.
National Express has bus and coach operations in Spain and
Britain, runs school buses in the United States, and has a
German rail contract.
Stagecoach, solely focused on Britain, is the country's
biggest bus and coach operator. The company was founded by Brian
Souter and his sister Ann Gloag in Perth in 1980, starting out
with just two buses bought with their father’s redundancy money.
They still own stakes in the company - Souter has about
14.55% and Gloag around 10.47%, based on Refinitiv data.
Under the terms of the potential takeover, Stagecoach
shareholders would receive 0.36 new National Express shares for
each Stagecoach share, giving them a 25% stake in the merged
group.
That represents an 18% premium on the closing price of
Stagecoach's shares on Monday.
Stagecoach's stock jumped 20% to 81 pence in early trading
on Tuesday. National Express rose 7% to 239 pence per share,
giving it a market value of 1.48 billion pounds.
During the pandemic, both Stagecoach and National Express
received government support to keep services running when
passenger numbers were down, but that funding will end in the
coming months.
Transport usage is starting to recover as workers return to
offices, but is still not near its pre-pandemic levels.
The companies said the tie-up would make pre-tax cost
savings of 35 million pounds per year through efficiencies such
as National Express utilising Stagecoach's depots for its coach
operations.
Stagecoach runs the megabus service, which like National
Express, operates coach services between British cities.
Citi analysts said the deal would be positive for the
transport sector. Rival UK operators FirstGroup and
Go-Ahead also rose around 3% on news of the potential
deal.
"We have argued for consolidation in the UK Public Transport
given the structural challenges facing the industry, i.e. the
pandemic impact on passenger volume and capex headwinds related
to the adoption of environmentally-friendly vehicles," Citi said
in a note.
The companies said that discussions and due diligence
remained ongoing and there could be no certainty of a formal
offer.
Should a deal go ahead, Stagecoach's chairman Ray O'Toole, a
former chief operating officer at National Express, would become
chair of the combined group, while National Express chief
executive Ignacio Garat would continue as CEO of the merged
entity.
($1 = 0.7310 pounds)
(Reporting by Sarah Young; Editing by Kate Holton, Michael
Holden and Jane Merriman)
