(Bloomberg) — National Express Group Plc agreed to buy rival U.K. bus operator Stagecoach Group Plc in an all-share transaction worth about 470 million pounds ($622 million), uniting two of the country’s biggest transport firms.
Stagecoach’s owners will get 0.36 new National Express shares for every one they currently own, the companies said Tuesday, after reaching agreement on a planned deal first disclosed in September. The valuation is based on current stock prices.
Merging with Stagecoach will boost London-based National Express’s share of a British bus market that’s been protected from the worst ravages of the coronavirus outbreak by state support. At the same time it will keep down costs through the sharing of bus depots, routes and office functions as the industry transitions to electric vehicles from a largely diesel fleet.
The enlarged business will “benefit from the significant growth and cost synergies and a stronger balance sheet,” according to National Express Chief Executive Officer Ignacio Garat, who will lead the combined group.
Stagecoach shares traded 6.7% higher at 80.5 pence as of 10:27 a.m. in London while National Express was little changed at 236 pence.
National Express investors will own 75% of the merged company, which will have about 40,000 vehicles and a workforce of around 70,000 people, according to the release. The deal represents an 18% premium to Perth, Scotland-based Stagecoach’s closing price on Sept. 20, the last trading day before the preliminary offer announcement, which was initially reported by Bloomberg.
Founders Exit
The approach for Stagecoach comes after its co-founders, Scottish businessman Brian Souter and his sister Ann Gloag, began selling down a near 30% stake in April and indicated that they wanted to cut the holding to 5% in a decade.
U.K. bus companies are focusing on the challenges and opportunities of moving to all-electric fleets after largely exiting train operations, squeezed out by state-owned European companies with access to cheaper cash.
National Express, the biggest U.K. operator of long-haul coach services and the second-largest school bus provider in the U.S., is in acquisition mode after making former FedEx Corp. executive Garat CEO last year.
The Stagecoach takeover will mark the latest round of dealmaking in the bus industry. FirstGroup Plc agreed earlier this year to sell its U.S. school bus business for $4.6 billion to Swedish investment firm EQT AB, while National Express itself agreed in June to buy Spanish bus group Transportes Rober.
Stagecoach Chairman Ray O’Toole will occupy the same position at the new group, having worked at both firms.
(Updates with deal value in first paragraph.)
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