Rebel investor turns up the heat in National Express dispute

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The Independent Online

National Express's dissident shareholder group turned up the pressure on its chief executive, Dean Finch, yesterday by claiming the support of the Cosmens, the Spanish family that is a major shareholder in the transport giant.

Elliott Advisors, the US hedge fund that owns 17.5 per cent of National Express, said it expects the Cosmens, who also own more than 17 per cent, to vote in favour of the controversial resolutions that Elliott is tabling at next month's annual general meeting.

The Spanish family's stake dates back to the sale of its Alsa bus business to National Express in 2005.

The dispute centres on new appointments to the National Express board. At the end of last month, Elliott Advisors called on shareholders not to renew non-executive director Roger Devlin's tenure, and proposed three new, independent candidates to replace him.

Elliott was careful to stress its continuing support for Mr Finch, the former Tube Lines chief executive who has helped to turn National Express around since the group's East Coast rail franchise was taken back into public ownership in July 2009, plunging the group into the red. But with the turnaround complete, Elliott says the board now needs some new thinking to meet the opportunities and challenges ahead.

The hedge fund's proposals have provoked outrage at National Express, which is already in the process of selecting extra board members through its formal nominations committee. The company branded Elliott's direct appeal to shareholders as an attempt to circumvent usual corporate governance arrangements.

"Elliott is foisting candidates they are claiming are independent onto the board while ignoring corporate governance best practice," a source close to the company said yesterday.

So far the Cosmen family, who tried to take over National Express in 2009 with CVC, have been silent on the subject, although an open letter to shareholders from National Express's chairman, John Devaney, last week rejecting Elliott's proposals ostensibly spoke on behalf of the entire board, of which Jorge Cosmen is the deputy chairman. But Elliott upped the ante yesterday with the claim that the Cosmens are on its side after all.

"Elliott has had a number of discussions with representatives of the Cosmen family in relation to its proposals to appoint three new directors to the board," the hedge fund said. "Based on those discussions, Elliott expects that the Cosmen family and its nominees will vote their shares in favour of the resolutions Elliott has requested to be tabled."

National Express was quick to pour scorn on the claims, with sources close to the company stressing that the statement was from Elliott only.

The maths of the AGM voting could be a close-run thing. Between them Elliott and the Cosmens own nearly 35 per cent of the group, a hefty chunk of voting power at a ballot likely to run to perhaps 70 per cent of shareholders. Only Co-operative Asset Management, which owns 2.7 per cent of National Express, has come out in support of the management position so far. But there are rumours that M&G, the third largest shareholder, with 13 per cent, is also backing the board – although it is yet to go public.

The Elliott challenge came just weeks after National Express failed to make the re-tender shortlist for the East Anglia rail franchise.

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