Spain's Cosmen family bought yet another tranche of National Express shares yesterday, upping the pressure on the company's board ahead of Friday's vote on the proposed £360m rights issue.
The latest purchase of 400,000 shares – added to the two other blocks of stock acquired in the past week – takes the family's holding to a total of 19.72 per cent. The Cosmens last month publicly criticised the National Express board's plan for a huge rights issue to address the beleaguered group's precarious financial position.
They warned of "serious concerns about the absence of a well-defined strategy". According to the family, the management should be considering alternative options, such as resetting of loan covenants, before undertaking a massive cash-raising exercise that will issue seven new shares for every three in circulation.
The stake-building is just the latest move in the struggle between the National Express board and its biggest shareholder. Even with the last seven days' extra 1.65 million shares, the Cosmens are far from able to derail the rights issue plan single-handedly at Friday's extraordinary general meeting.
But the buying spree is designed as a message to both the board and the group's other shareholders. Even if the rights issue gets the go-ahead, the Cosmens are committed to a long-term role in the business and are likely to take up their option to buy rather than suffer the dilution to just 6 per cent that would result.
Spending around £4.4m on shares in less than a week also puts paid to the market gossip about the family's financial position. "There have been rumours recently that the only reason the Cosmens are opposing the rights issue is that they don't have enough money to buy the shares that will come on offer," a City source said.
National Express said that discussions with its other shareholders suggest no significant support for the Cosmens' position. But the family is understood to think that voters holding as much as 10 per cent of the stock may support their views. And with 10 per cent of the stock on loan to brokers, and therefore potentially absent from the voting, Cosmen supporters maintain that there is a chance the plan will be blocked.
National Express's problems came to a head in July, when the over-leveraged group was forced to hand the East Coast Main Line rail franchise back to the Government because it could not afford to keep it. The Cosmens' own £765m takeover bid, in a consortium with private equity group CVC, foundered in October over disagreements on strategy.
A subsequent bid from rival Stagecoach also fell down because the National Express board preferred a rights issue. The Cosmens claim Stagecoach was dismissed without due consideration. And while a rights issue could be part of the solution, it should come after restructuring rather than before.