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Cosmen is key to future of National Express

Jorge Cosmen, the deputy chairman at beleaguered transport group National Express, is set to play kingmaker as rival FirstGroup continues to push for an all-share merger that would create a £2.2bn giant.

The Spaniard is also the company's biggest shareholder with nearly 18.7 per cent through his European Express Enterprises vehicle, and bankers acting for FirstGroup are believed to be set to contact him. A FirstGroup source said that an approach had "not yet" been made, but hinted that contact was on the cards. If Mr Cosmen was persuaded of the advantages of a merger, his shareholding and non-executive standing would help secure a deal.

FirstGroup confirmed last Monday that it had made a preliminary approach in June. However, it was rejected.

This was the just the start of a horrendous week for National Express, which walked away from its £1.4bn East Coast mainline contract. The Government is to renationalise the line at a cost of hundreds of millions of pounds.

In a trading statement on Wednesday, the group also warned that its profits were likely to be hit by the franchise's failure. And Richard Bowker, the company's chief executive, announced his resignation to move to the United Arab Emirates where he will oversee the country's £20bn rail development programme.

The chairman, John Devaney, has taken over until a replacement for Mr Bowker is signed up. National Express is looking at a £400m rights issue to cut its £1.2bn debt burden. However, the company itself is only worth about £420m following a share price collapse over the past 12 months. If Mr Cosmen refused to participate in a rights issue, the remaining shareholders would be left with a massive financial burden.

"Shareholders potentially face a glaring hole, and they know that the Government hates them following the collapse of the East Coast contract," said the source. "We will wait until the board comes back to us [to discuss the potential merger]."

Another source confirmed market speculation that FirstGroup would not go hostile. The company is willing to wait to see if the Government strips National Express of any other rail franchises.