Nat Ex and Stagecoach agree merger as three business sold to enable deal

FULL STORY: National Express and rival Stagecoach are to merge by “late 2022” after months of talks.

Initially explored in September, merger talks went on past the initial Stock Market deadline, with an extension agreed to 16 November, was later pushed to today.

Following the announcement, shares for both Stagecoach and National Express rose by 12 and 2.98 per cent respectively.

The new company – which will have a fleet of around 40,000 vehicles and a workforce of 70,000 – will be owned 75 per cent by National Express, leaving a 25 per cent stake to the Stagecoach Group. It’s name has yet to be revealed.

National Express is best known for its intercity coach operation, but it also operates the majority of buses in the West Midlands (Birmingham, Wolverhampton and Coventry). Stagecoach has bus operations across the UK.

Under the terms of deal – which might need to be scrutinised by the Competition and Markets Authority (CMA) – Stagecoach’s shareholders will receive 0.36 new National Express shares in exchange for each Stagecoach share they hold.

In addition to announcing the merger, Stagecoach today disposed of three of its subsidiary businesses, including low-cost coach service Megabus, which might have triggered a CMA investigation as it competes with National Express’s coach operations

As a result of the merger, the combination company is expected to provide savings of £45m, achieving 25 per cent by the end of the first year and 85 per cent by the end of the second.

According to global law firm Ashurst, the combined group’s pro-forma market capitalisation will be around £1.9bn. The deal is thought to be worth around £470m.

“This is an exciting opportunity to bring together two of the UK’s iconic transport brands to create a strong, diverse business that is well-placed to grow the market for greener and smarter public transport for the benefit of all stakeholders,” said Stagecoach’s chief executive Martin Griffiths.

The merger comes amid Stagecoach reporting encouraging half year results, as the company’s profits rose to £32.9m, while earnings per share went up from 0.1p to 2.7p.

New board structure

Under the merger there will be board and management changes, which will see Stagecoach CEO Martin Griffiths step down. The proposed new structure is:

  • Ray O’Toole, Chairman of Stagecoach, will become Chairman of the Board of the Combined Group, leveraging his prior experience across both businesses, with Sir John Armitt CBE stepping down having been Chairman of National Express since February 2013.
  • Jorge Cosmen, Deputy Chairman of National Express, will become Deputy Chairman of the Board of the Combined Group.
  • Ignacio Garat and Chris Davies, CEO and CFO respectively of National Express, will become CEO and CFO respectively of the Combined Group.
  • The Board of the Combined Group will comprise a combination of National Express and former Stagecoach directors, approximately in proportion to the expected pro forma ownership of the Combined Group.  Gregor Alexander and Lynne Weedall, currently independent non-executive directors of Stagecoach, will join the Board of the Combined Group and become chairs of the Combined Group’s Audit Committee and Remuneration Committee respectively.
  • Tom Stables, CEO of National Express UK and Germany, will become CEO of UK and Germany for the Combined Group. Carla Stockton-Jones, UK Managing Director of Stagecoach, will become the Managing Director of UK Bus for the Combined Group.

In a joint statement National Express and Stagecoach said:

“The Boards of National Express and Stagecoach believe that the Combination of National Express, the international and diversified public transport operator, with Stagecoach, one of the largest UK bus operators, has a compelling strategic rationale, providing an opportunity for the Combined Group to:

·      further build scale and relevance in an increasingly ‘bus-friendly’ UK market, supported by the £3 billion National Bus Strategy for England as well as measures in Scotland and Wales;

·      facilitate an acceleration of the expansion of National Express’s growth businesses across the UK, such as commuter, shuttle, private hire coach and accessible transport, across Stagecoach’s footprint, as well as deliver other growth and revenue synergies;

·      expand across the UK’s large urban areas, whilst continuing to enhance strong relationships with key public sector stakeholders and city partners who are aligned on the need for modal shift;

·      implement industry-leading environmental and sustainability solutions at scale to deliver high quality, zero-emission public transport, driving customer demand and playing a critical role in delivering government priorities for cleaner, greener and more resilient economies;

·      deliver significant operational efficiencies across the combined UK networks, with, for example, National Express Coach utilising Stagecoach’s well-located depot network to run and maintain its coach operations; and

·      bring the ‘best of both’ from the combined capabilities of two high quality operators with well-aligned values and collaborative cultures, whilst also delivering significant benefits to customers and passengers, across key aspects of the business including on-board technology and safety; scheduling, network and route planning; and congestion management.

“The Combination also provides a compelling opportunity to be a strategic accelerator for the Combined Group, with increased scale and financial flexibility facilitating accelerated growth investment in an attractive and diversified £1.5 billion global pipeline of opportunities, in particular, in National Express’s North American and ALSA businesses.”

Stagecoach sells businesses to head off CMA investigation

In order to avoid a CMA investigation, Stagecoach has sold three inter-city coach businesses: Its stake in Scottish Citylink and the retail and customer service activities of Megabus UK and Falcon to ComfortDelGro Corporation Limited (CDG).

·      Stagecoach’s 35% interest in Scottish Citylink Coaches Limited, a joint venture between Stagecoach and CDG, which markets and retails inter-city coach services in Scotland and between Scotland and England (Scottish Citylink);

·      the UK Megabus business which markets and retails inter-city coach services in England and Wales (Megabus UK); and

·      Falcon South-West, which markets and retails tickets for a single coach route between Plymouth, Bristol and Bristol Airport (Falcon).

·      The total proceeds for the Disposal are £8.75 million, which is expected to complete on 28 February 2022.

Martin Griffiths, Stagecoach Chief Executive, commented: “Stagecoach developed the Megabus brand in 2003, as we saw real potential in the long-distance inter-city coach market in the UK. In 2005, our belief in this market saw us create a joint venture with CDG to run the Scottish Citylink business and we further expanded our inter-city coach business with the development of our bespoke Falcon service in the South West of England serving Bristol Airport. Through this transaction, Stagecoach ensures that those business will continue to thrive under the ownership of the world renowned CDG brand”.

The details of the disposals

Stagecoach, through its wholly owned subsidiary Stagecoach Bus Holdings Limited, announces the sale of the entirety of its 35% stake in Scottish Citylink to Braddell Limited, a wholly owned subsidiary of CDG, which owns the majority 65% stake in Scottish Citylink.

In addition, Stagecoach through its wholly owned subsidiaries: Stagecoach Services Limited, Stagecoach Bus Holdings Limited, Midland Red South Limited and Stagecoach Devon Limited announces the sale of the marketing, retail and customer services activities of its Megabus and Falcon inter-city coach businesses to Scottish Citylink, which will then be a wholly owned subsidiary of Braddell Limited.

Stagecoach will continue to provide sub-contracted bus and coach operational services to the inter-city coach operations which will now be owned by CDG.

The consideration for the Disposal is £8.75 million, comprising £7 million payable in cash at completion and the assumption by CDG of an existing shareholder loan of £1.75 million extended to Stagecoach Bus Holdings Limited by Scottish Citylink.

Additional financial information

For the half-year to 30 October 2021 the marketing, retail and customer service operations of Megabus UK and Falcon had operating losses of £3.9m, and for the full year to 1 May 2021, operating losses were £3.7m. Stagecoach’s share of operating profit in Scottish Citylink for the half-year to 30 October 2021 was £0.1m and for the full year to 1 May 2021 it was an operating loss of £0.4m.

For the full year to 27 April 2019, which was the last full financial year prior to Covid-19, the marketing, retail and customer service operations of Megabus UK and Falcon had operating profit of £0.7m. For that same period, Stagecoach’s share of operating profit in Scottish Citylink was £2.5m.

The gross assets of the marketing, retail and customer service operations of Megabus UK and Falcon as at 30 October 2021 were £0.4m. Stagecoach’s share of the gross assets of Scottish Citylink as at 30 October 2021 was £5.7m.


National Express used to run a UK-wide express coach network, but when it won the ScotRail rail franchise in 1997, the then Competition Commission required it to dispose of its Scottish coach operations. As a result, only cross-border coaches (such as to Edinburgh/Glasgow) were allowed to be retained by National Express.

A new company, Scottish Citylink was created for internal coach services.

When it came up for renewal in 2004, National Express lost the ScotRail franchise to FirstGroup, but the Scottish Citylink operation remained.

Megabus UK and National Express coach is under increasing pressure from Germany-based Flixbus, which recently entered the UK market, having already overtaken its competitors (including Megabus) in Europe.

In April 2021 Flixbus said that it aims to become the UK’s largest intercity coach operator by 2025 – with Megabus and National Express firmly in its sights.

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