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The future of stricken National Express was in doubt today as a £1.7 billion rescue takeover offer fell apart and speculation mounted that the biggest brand in British transport is set to be broken up.
Shares in the train, coach and bus group crashed more than 25% after its biggest shareholder, the Cosmen family from Spain, abandoned its 500p-a-share offer.
The failure of the Cosmen consortium, which included UK arch-rival Stagecoach and the private-equity house CVC, to make the bid work sent National Express shares plunging 126p to 345p and set alarm bills ringing.
Word in the City is the bid failed on the ability to refinance National Express's £1 billion of debt, particularly with a £490 million loan maturing next spring.
National Express says it will now launch a rights issue, probably as early as next week. But investors are fretting at the size of that fundraiser, put at as much as £400 million.
The rights issue shares are likely to be hugely cut-price against a backdrop of National Express's market capitalisation having already fallen to £500 million against a takeover offer value of £765 million. Ray O'Toole, the chief operating officer who has been running National Express since its boss Richard Bowker walked out in July, said: “Our Plan A has always been to be an independent company and we can now set about strengthening our balance sheet. The bid has been a distraction but it is now out of the way.”
However, O'Toole refused to rule out disposals to help refinance the company. “We will continue with a programme of self-help measures,” he said.
The City is awash with speculation that either Stagecoach or FirstGroup will make break-up offers. Stagecoach (which runs Waterloo's South West Trains and St Pancras's East Midland Trains and co-owns Virgin Trains) and FirstGroup (the operator of FirstCapitalConnect and services out of Paddington) are banned under Takeover Panel rules from launching a bid for National Express Group until the new year. However, they can make offers for National Express's Liverpool Street and Fenchurch Street rail franchises serving Essex and East Anglia (though not the King's Cross East Main Line franchise from which it was sacked in the summer by the Department of Transport and which precipitated the current crisis at the company). Its West Midland bus business could also attract offers.
Today's aborted offer was launched in July by National Express's deputy chairman Jorge Cosmen, who speaks for 18.5% of the shares, to protect the interests of his family who had sold their Spanish bus and coach operations to National Express. CVC is reckoned to have failed to come up with the finance to back the bid in troubled times for private-equity firms.
Reader views (5)
I cannot think of one memorable thing National Expresshas done for the benefit of passengers on the Edinburgh to London run. Cups and saucers were replaced with mugs in 1st class, and hard to clean plastic bottle holders on tables. Mugs are very unhygienic. Hands and fingers all over the lip. A range of complimentary biscuits and nibbles disappeared. GNER had class. National Express had none. Only one thing can be worse for that line and it is to be taken over by Virgin.
- Cyrjames, Berwick UK
Nationalise it and be done with it - there are hardly any wolves at the door are there? Train "companies" cannot make money without huge public subsidies anyway. This government (responsible for "third way" disasters like PPP) does not want to face the facts, it's likely Conservative successor does not dare open it's mouth on the issue, and it's predecessor should never be forgiven for privatising British Rail the first place.
- David, N10
Is the Tax Payer expected to bail this consortium out so the Directors can recieve their,bonuses
Yet another example of asset stripping by faceless Bureaucrats
- Barry Deane, Richmond, United Kingdom
Why?
Easy! Pull out, let it go to the wall, and buy it back for a lot less than 500p a share from the administrator.
- Dave Davies, Basingstoke, Hants
I have not been on a train for 30 years. Why, its too dear. If I want to go from Machester to London with my family its a fortune. I can get there and back on 7 galls of diesel with a car that I allready own. Trains only survive because where the employment centres are there are no parking spaces. And if it wasent for these stupid green belt rules many of these inner city firms could re-locate to the countryside like Barclays did years ago by moving to Knutsford and provide a giant car park.
- Jim Allan, Lake District
