(Alliance News) - National Express Group PLC and Stagecoach Group PLC are in talks for a merger, the two companies said on Tuesday, in a deal that would combine two of the UK's largest transport providers.
Under the proposed terms, Stagecoach investors would receive 0.36 of a National Express share for each Stagecoach share. It means National Express shareholders would own about 75% of the combined company.
Based on Monday's closing prices, the deal represents an 18% premium for Stagecoach shareholders.
National Express shares were up 3.8% to 231.40 pence in London on Tuesday morning. Stagecoach leapt 16% to 79.00p.
A deal would bring operational and cost efficiencies, and create more opportunities for growth, the companies said. National Express added that it has identified GBP35 million per year in savings, by combining both companies' depots, sharing technology and cutting administrative costs.
"It is expected that the realisation of these identified synergies will require one-off costs of up to approximately GBP40 million, broadly split equally across the first two years following completion of the potential combination," National Express said.
Birmingham-based National Express operates local and long-distance bus services in the UK, North America and elsewhere, as well as trains in Germany.
Stagecoach, based in Perth, Scotland, operates local buses across the UK and long-distance coach services under the Megabus brand - one of National Express's main competitors in the market, creating a potential regulatory hurdle.
FTSE 250-listed National Express has a market capitalisation of around GBP1.47 billion, while Stagecoach is worth about GBP442 million, based on intraday prices on Tuesday.
The board of the combined company would have proportionate shares of National Express and Stagecoach directors. National Express Chief Executive Ignacio Garat and Chief Financial Officer Chris Davies would remain in their roles. Ray O'Toole - Stagecoach chair and former National Express CEO - would be chair of the enlarged company.
By Ivan Edwards; ivanedwards@alliancenews.com
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