Spanish group raises National Express bid to 500p per share

New £765m offer includes plan for Stagecoach to take on rail and bus franchises
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The Independent Online

The Spanish consortium eyeing National Express has upped its offer to £765m in a proposal that would see rival Stagecoach take over the beleaguered group's two remaining rail franchises and UK bus business.

National Express has already rejected one offer – at 450p a share – last week, claiming the approach undervalued the business. The company proposed a £350m rights issue instead. But the new 500p-a-share bid from CVC Capital Partners and the Cosmen family is nearer the level that insiders suggest is considered fair value.

The consortium says the offer represents a fresh start for National Express, which has been in turmoil since the shock announcement in July that it was to hand the East Coast Mainline franchise back to the Government.

"The offer provides the opportunity to draw a clear line under the recent difficulties associated with the company's UK rail franchises, relations with the Department for Transport (DfT), balance sheet concerns and weak financial performance – all of which have resulted in a significant destruction of shareholder value," CVC said yesterday.

The Stagecoach side-deal, which rules the Scottish group out of making its own offer, has been cleared by the Government as a route to avoiding the imposition of "cross-default" rules that would see National Express stripped of its c2c and East Anglia rail contracts as well as East Coast Mainline. "Stagecoach has had constructive discussions with the DfT regarding a possible change of control of the rail franchises currently operated by National Express," Stagecoach said yesterday.

The 500p offer is final, but the CVC consortium said it could still change the terms of the proposal if a third party puts forward a competing bid. National Express said it is evaluating the proposal and will respond in due course. The company's shares shot up by 13 per cent to close at 465.9p.

The Cosmens already hold an 18.5 per cent stake of National Express thanks to the group's £149m acquisition of Alsa, the family's Spanish bus company, in 2005. Jorge Cosmen is deputy chairman of National Express, although he had not been present at any of the board meetings convened to discuss the sale of the business.

National Express was already struggling under more than £1bn of debt before the problems with East Coast Mainline blew up so dramatically this summer. The troubles stem from a franchise deal signed at the top of the market. The deal relied on passenger growth of more than 9 per cent to support payment commitments that hit £138m this year alone. With recession taking a chunk out of rail travel and sending passengers to the internet for bargain fares, growth has plummeted to just 0.3 per cent. And when the Government refused to renegotiate the deal, National Express's only option was to walk away. Richard Bowker, the chief executive, resigned the same day, taking up a post in the Middle East.