New bidder pondering National Express takeover

Struggling transport group National Express remained in the takeover spotlight today after it confirmed an unnamed bidder was circling the business.

The UK's biggest transport firm, FirstGroup, dropped its interest in the ailing group yesterday, but National Express has received another approach - rumoured to be from Stagecoach.

Earlier this month, National Express was forced to walk away from its loss-making East Coast rail deal after failing to renegotiate the franchise with the Government.

The firm - which is almost certain to hand over the franchise to the Government by the end of the year - has been warned it could lose its two other rail franchises - East Anglia and London commuter service c2c.

But shares in the group rose more than 5 per cent at one point after it confirmed the interest from the anonymous third party, "whose intentions are not yet known".

National Express is labouring under a £1.2 billion debt mountain as well as facing the possible loss of its rail deals.

First announced last night that it would be "inappropriate" to consider a formal offer for the firm because of "uncertainties" around the business.

Manoj Ladwa, senior trader at ETX Capital, said: "The debt mountain - nearly half of which needs to be refinanced in the next year - will make the new bidder, rumoured to be Stagecoach, very wary.

"However, since the abandoning of the East Coast Main Line franchise it has become a case of when, not if, National Express gets taken over."

Aberdeen-based First - which had been given a "put up or shut up" deadline on the possible merger - said: "The board of FirstGroup has considered its position in light of these uncertainties and now believes it would be inappropriate to consider a formal offer at this time."

Cash-strapped National Express had been contracted to run the East Coast franchise until 2015, but saw financial pressure rise as passenger growth stalled in the recession. The deal lost £20 million in the first half of this year.

Transport Secretary Lord Adonis subsequently announced that a new public organisation - East Coast Main Line Company - would operate the line.