National Express (NEX) has made an all-share takeover approach for Stagecoach (SGC), triggering an 8% rise in the former's share price and a 22% rise in the latter.

It wants to buy the business to increase its position in growth areas such as private coach hire and corporate transport.

Running the businesses as one would also create operational synergies and economies of scale benefits, with National Express suggesting cost savings could reach £35 million per year.

While a formal bid hasn’t been made yet, National Express says it is prepared to give 0.36 new shares for every Stagecoach share. That would mean Stagecoach shareholders would own a quarter of the combined group.

The terms of the all-share proposal imply an 18% bid premium for Stagecoach based on last night’s closing price.

‘A key factor to consider is whether someone else might fancy owning Stagecoach, such as an overseas transport operator,’ says Russ Mould, investment director at AJ Bell.

‘It is not an easy feat to build up a large position in the UK public transport market and Stagecoach now has 8,400 buses and coaches.

‘There may be some nervousness around using public transport at present due to the lingering pandemic, but long term it seems inevitable that buses will remain a vital part of the UK’s transport network.’

Jefferies analyst Becky Lane says that while National Express’ all-share offer looks financially attractive with double-digit earnings accretion and enables the buyer to de-lever quicker, she believes investors will have questions around competition approval, future regional bus growth and the coach opportunity rationale.


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Issue Date: 21 Sep 2021