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National Express is to go for a last roll of the dice and a rights issue of up to £500 million, after its latest merger deal fell apart.
Shares in trains, coaches and buses group National Express plunged 55.6p to 307.3p, a fall of 15%, after the proposed merger with arch-rival Stagecoach fell apart.
The failure of a deal with Stagecoach comes after the collapse of a more advanced deal, a £1.7 billion, 500p share takeover by its largest shareholder, the Spanish Cosmen family in league with the private equity firm CVC.
The subsequent Stagecoach merger plan had envisaged Stagecoach having no less than a 60% stake in an enlarged group. That, said National Express, was just one of the sticking points.
It also cited Stagecoach's due diligence requirements, the timing and feasibility of obtaining debt financing for the enlarged group, the requirement for future fundraising and the need for disposals, either on competition grounds or to raise cash.
“The board has concluded it is unlikely that a combination with Stagecoach could be successfully executed in 2009, even if appropriate terms could be agreed,” said National Express.
With rising interest rates on its £1 billion debt mountain, National Express now needs to get away a rights issue as soon as possible to prevent the business leaking cash.
Its statement to the Stock Exchange continued: “The board believes it is in shareholders' best interests that an equity fundraising be undertaken as soon as possible, and expects to make a further announcement regarding such fundraising during the course of November 2009.”
