(Alliance News) - National Express Group PLC's trumped offer for Stagecoach Group PLC from German asset manager DWS has breathed life back into the M&A market amid fears activity would dry up amid geopolitical pressures.
The battle for Stagecoach comes on the back of a spate of cancelled acquisitions in London. The global market turmoil caused by Russia's invasion of Ukraine claimed an M&A victim earlier this week.
Spectris PLC on Monday called off talks with fellow FTSE 250 constituent Oxford Instruments PLC over a potential takeover, blaming the market uncertainty caused by Russia's attack on its neighbour.
Oxford Instruments confirmed at the end of February it had received a takeover offer proposal from Spectris worth about GBP1.8 billion. Oxford Instruments, which makes scientific tools for research and industry, said the final offer on February 28 followed a "series of earlier proposals" from Spectris.
Oxford Instruments noted the proposal was "unsolicited" and still believes it has a "clear and compelling" strategy to achieve growth on its own.
As such, discussions between the two parties have now been terminated.
"There have been concerns in the City of London that M&A deals would dry up while markets are extremely choppy, just as we recently saw with the very short-lived attempt by Spectris to buy Oxford Instruments. However, the M&A juggernaut keeps on trucking as evidenced by a counterbid for transport group Stagecoach from infrastructure investor DWS," said AJ Bell's Russ Mould.
National Express on Wednesday noted the announcement by Stagecoach Group that it has accepted a new cash takeover offer and no longer recommends the all-share merger previously agreed with National Express.
The company asked Stagecoach shareholders to take no action, saying a further announcement will be made "in due course".
Stagecoach, a Perth, Scotland-based bus and train operator, earlier Wednesday said its directors unanimously recommend a new GBP594.9 million cash offer from Pan-European Infrastructure III SCSp, an infrastructure fund managed and advised by DWS Infrastructure.
They no longer support the previously agreed all-share merger with Birmingham-based peer National Express. That deal, struck back in December, would have created a GBP1.9 billion market-cap public transport provider, though it was being reviewed by the UK Competition & Markets Authority.
DWS will offer Stagecoach shareholders 105 pence in cash, which is a 37% premium to its closing price on Tuesday.
Under the National Express merger offer, Stagecoach shareholders would have received 0.36 of a new National Express share for each Stagecoach share.
Stagecoach Chief Executive Martin Griffiths said the new DWS deal "will open a new and exciting chapter".
Under the new deal, Stagecoach will remain based in Perth. Under the proposed merger with National Express, the headquarters would have been in Birmingham. The management of Stagecoach also will remain in place.
The DWS offer has acceptance for 10.5% of Stagecoach from shareholder Ann Gloag. It needs 75% for the offer to be declared unconditional. DWS also has signed a memorandum of understanding with the trustees of the Stagecoach pension fund regarding future funding.
"National Express' takeover offer for Stagecoach has now been trumped by a considerable margin, which explains why the target's board has switched allegiance to the new suitor. With share prices down across so many sectors, someone looking to acquire could find more attraction valuations in the current market so opportunistic bids could become a theme over the coming month," Mould added. "The key challenge will be convincing shareholders to accept a bid as there would be a strong argument to suggest that current share price weakness may only be short-lived."
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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