The Spanish consortium in the running for National Express has upped its offer to 450p per share, leaving shareholders with a choice between the £689m approach and the board’s proposal for a £350m rights issue.
The consortium led by CVC Capital Partners, a private equity group, also includes the Cosmen family, who already own 18.6 per cent of National Express following the company’s £149m acquisition of Alsa, the Spanish bus operator owned by the family, in 2005. Jorge Cosmen, who is deputy chairman of National Express, has not been present at any of the relevant board meetings.
The approach is understood to include a number of caveats, including conditions relating to National Express’s surprise exit from the £1.4bn East Coast Mainline franchise and the future of its two other rail contracts, c2c and East Anglia.
The beleaguered transport group said yesterday it was considering the new offer, revised upwards from last month’s 400p-per-share pitch, and would respond in due course.
“The Independent Board continues to explore a range of options to accelerate the reduction of the group’s borrowings in a way that will create value for all National Express shareholders,” National Express told the Stock Exchange yesterday. “In this context, the Independent Board has been discussing a potential equity fundraising with investors should a recommendable offer not be forthcoming.” National Express is in serious trouble. It is labouring under nearly £1bn debts, and despite doing a deal with its bankers in June to relax the terms, is still in danger of breaching its covenants.
Matters came to a head with the high-profile debacle over East Coast Mainline train in early July. To fund contractual payment commitments that hit £138m this year alone, National Express needed passenger revenue growth of more than 9 per cent. But recession sent growth plummeting to just 0.3 per cent and the Government refused to renegotiate, leaving no option but for the line to be taken back into public ownership. National Express’s chief executive, Richard Bowker, resigned the same day.
Lord Adonis, the Transport Secretary, has also threatened to strip National Express of the c2c and East Anglia franchises, as well as hinting heavily that the group is unlikely ever to win another rail contract.
Notwithstanding the problems, National Express is keen on an independent future and sources suggest that only an offer of 500p-per-share or more would be considered a fair representation of its value.
The CVC/Cosmen consortium is the only interested suitor. Rival transport giant FirstGroup made an all-share approach in June, only to be rejected on the grounds that it would be “inappropriate”. FirstGroup has been quiet on the subject since, but at the time it did not rule out another try. “The board of FirstGroup continues to believe that there is significant industrial and commercial logic in a combination of the two companies,” it said in a statement.
Within a month of FirstGroup’s rejection, the CVC/Cosmen consortium joined the fray and the Takeover Panel set a Put Up or Shut Up deadline of 11 September. Meanwhile Stagecoach started talks with the consortium about the possibility of buying parts of National Express should the acquisition go ahead. Stagecoach has also not ruled out making an offer of its own.