The British bus operator Stagecoach has dropped its support for a £1.9bn merger with National Express, instead agreeing to be taken over by a big German infrastructure fund in a £595m deal.
In a sudden U-turn, Stagecoach said it was recommending a sale to the fund managed by DWS Infrastructure for 105p a share in cash, and has withdrawn support for the National Express bid.
The announcement came just hours before Stagecoach suffered a strategic blow in its attempt to halt bus franchising around England. Last year Stagecoach and its fellow operator Rotala were granted a judicial review of Greater Manchester’s plans to introduce franchising, but in a judgment on Wednesday, the plans were upheld as lawful.
Stagecoach has fought bitterly against plans to reverse the deregulation that enabled its initial growth in the 1980s. Andy Burnham, mayor of Greater Manchester, said the verdict was “truly fantastic news for everyone outside London who wishes to see a return to a bus service that puts people ahead of profit” and “a green light for the north to retake control of its bus and public transport system”.
Shares in Stagecoach ended 36% up on the day despite the verdict, with shareholders set to profit from the DWS bid replacing the all-share deal apparently sealed in December, that would have brought Stagecoach’s UK local bus operations together with National Express’s intercity coach network.
That tie-up was being investigated by the Competition and Markets Authority, which served an initial enforcement order in January to stop the firms from combining operations or selling any UK businesses while it looked into the deal.
DWS, spun out from Deutsche Bank in 2018 via a flotation on the Frankfurt stock exchange, has a number of other investments in the UK, including Corelink Rail Infrastructure; Kelda, the owner of Yorkshire Water; and Peel Ports.
Stagecoach said the DWS bid offered greater certainty for investors and its 24,000 employees, with the overall headcount of bus drivers expected to remain the same, while Stagecoach’s headquarters in Perth, central Scotland, will be retained along with its staff. It added that the new deal, which is expected to be completed in the first half of this year, would also provide continuity at the top, with the chief executive, finance director and UK managing director staying on.
Martin Griffiths, the chief executive of Stagecoach, said: “The proposed offer presents a major opportunity to maximise the significant growth potential ahead as governments seek to deliver economic recovery, level up communities, provide better health outcomes for citizens, and transition to a net zero future.
“We believe it will open a new and exciting chapter for Stagecoach, backed by a team who share our vision for a more sustainable future.”
Stagecoach was launched in 1980 by a Scottish businessman, Sir Brian Souter, and his sister, Dame Ann Gloag. The DWS takeover will mark the end of the Souter family’s long interest in the sector, having grown from buying out a small local bus company to one of the main players in Britain’s privatised bus and rail industries.
Under the terms of the DWS takeover, Souter’s 14.5% stake in Stagecoach is worth £86.2m, while Gloag’s 10.5% holding is worth £62.5m.
In recent years, Stagecoach has shrunk, after selling its US operations and being squeezed out of UK rail. National Express also left UK rail after selling its last franchise in 2017 but still runs trains in Germany and buses in the US, Canada, Morocco and Spain.
