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Stagecoach, the UK’s largest bus operator, has received approaches from two

companies but the one from National Express risks a competition inquiry

National Express has launched a
fresh appeal urging investors to back
its takeover bid for Stagecoach, after
the target recommended a rival offer.
Stagecoach, the public transport
operator, last week reversed its deci-
sion to merge with National Express
after a higher offer appeared from
DWS, a German fund manager.
National Express said the deal
could unlock annual synergies of at
least £45 million a year which, when
applied to the shares’ pre-pandemic
valuation, would unlock value of
more than £500 million, represent-
ing 23p per Stagecoach share and 63p
for each National Express share. It
would also allow Stagecoach inves-
tors to benefit from future growth
within the industry.
“In a period that has seen a surge of
private equity firms acquiring British
companies, the combination repre-
sents a rare example of two UK listed
companies combining to form a
global leader in their industry,”
National Express said.
The National Express offer was an
all-share approach, pegged to the
value of its stock, which meant that as
its shares declined amid the market
turmoil of recent weeks, Stagecoach
shares also suffered.
Meanwhile the German offer is
higher, in cash and gets round the
uncertainties of a Competition and
Markets Authority investigation into
a deal with National Express that
would have meant the merged entity
controlling one in three buses on the
road in Britain.
However, National Express agreed
to sell its Megabus business in
anticipation of potential competition
obstacles ahead.
Brian Souter, co-funder of Stage-
coach, who retains a 15 per cent stake
in the group, had already pledged his
support to the National Express offer.
However, the group’s other co-
founder, his sister Dame Ann Gloag,
is backing the rival bid.

National Express has 60 days to

come back with an improved offer

once DWS issues a circular to share-

holders, which is expected soon.

Stagecoach is the UK’s largest bus

operator; National Express is domi-

nant in the country’s second-largest

conurbation, the West Midlands.

National Express had hoped to use

Stagecoach’s nationwide presence to

find synergies with the National

Express-branded intercity coach op-

erations. However, it is a business

more focused on developing its larger

interests in Spain and the US.

Analysts at the brokerage Peel

Hunt said they did not expect

National Express to prevail in its

pursuit of Stagecoach as sharehold-

ers were likely to prefer cash and at

National Express’s current share

price, the offer was worth less than

the 105p-a-share offer from DWS.

“As National Express needs to re-

duce leverage, it cannot offer cash,

and we do not expect it to be success-

ful in its pursuit of Stagecoach,” the

analysts said.

National Express made the ap-

proach for Stagecoach after the latter

had dramatically slimmed down.

Before the pandemic it quit its UK

rail businesses and Virgin joint ven-

tures in a row over pension liabilities

with the Department for Transport

and left the US after failing to crack

the market there in two decades.

At its recent capital markets day

the travel group had set out separate

targets for the standalone business,

which included targets for at least

£1 billion of revenue growth from

2022 to 2027, and at least £100 million

of profit growth during the period,

with an operating profit margin

averaging about 9 per cent.

The “dysfunctional” British mobile
market must consolidate from four to
three operators, Three UK has urged,
as it said its returns remained unsus-
tainably below its level of investment.
Posting full-year results yesterday,
Darren Purkis, chief financial officer,
said that the mobile market structure
was limiting returns and stifling net-
work investment, with the quality of
infrastructure “already poor”.
Ofcom said last month that it
would assess any consolidation in the
mobile market against the “specific
circumstances of that particular
merger” rather than on the appropri-
ate number of networks.
The regulator’s clarification has
renewed speculation of a tie-up
between Three and Vodafone in the
UK. Purkis, 49, said it was “just that at
this stage — rumours”.
“We feel there is a need for consoli-
dation, whether we are part of that
we will need to wait and see,” he said.
Purkis added: “With any consoli-
dation there needs to be the right
appetite from both parties. It’s never
easy... It’s a matter of opportunity
and circumstance.” He said that

National Express renews appeal

to investors on Stagecoach deal

Emma Powell

BAX WALKER/ALAMY

UK ‘has too many’ mobile operators

markets in Austria, Italy and Ireland,

where Three’s companies have

merged, was proof consolidation im-

proved investment.

Other industry bosses have called

for consolidation. Nick Read, chief

executive of Vodafone, has said the

UK was among four European coun-

tries where he saw “a very strong case

for consolidation without the need

for punitive remedies” from anti-

trust regulators and that it was a

“very fragmented” and “crowded

market place”.

Purkis made his comments along-

side results for last year which

showed that Three UK’s revenue rose

4 per cent to £2.4 billion and underly-

ing earnings increased by 10 per cent

to £609 million.

Its active contract customer base

was up 7 per cent as it added more

than half a million subscribers to

bring its total to 8 million. Its net cus-

tomer additions were the highest

since 2012.

Handset revenue rose by 13 per

cent to £772 million due to the in-

crease in its customer base coupled

with average handset price growth,

while registered contract churn fell.

Three UK is part of Hong Kong’s

CK Hutchison group, which has

mobile operations in 11 countries, and

employs 4,800 people in offices in

Reading, Glasgow and its 311 retail

stores.

Yesterday Ofcom urged telecoms

companies to do more to help cus-

tomers struggling to pay bills. The

regulator’s call comes amid the cost-

of-living squeeze and the industry

introducing price increases.

Ofcom said people suffering finan-

cial hardship should receive better

support from phone and broadband

providers. It wants them to work

more closely with debt charities,

avoid imposing service restrictions to

force payment and to stress the help

available for people struggling to pay.

Ofcom said its research showed

that 1.1 million households, 5 per cent,

are struggling to afford their broad-

band, or about one in ten among the

lowest-income households.

Alex Ralph

£2.4bn

Three UK’s revenue in 2021

Source: Three UK