Birmingham-based transport group National Express yesterday confirmed a new unnamed suitor has its eye on the debt-laden business after rival group FirstGroup dropped its interest.
National Express has received an approach from another firm – rumoured to be Stagecoach – after FirstGroup retracted its plans for a bid citing “uncertainties” surrounding its business.
Shares in National Express rose more than five per cent at one point yesterday after it confirmed the interest from the anonymous third party, “whose intentions are not yet known” according to the firm. Earlier this month, National Express was forced to walk away from its loss-making East Coast rail deal after failing to renegotiate the franchise with the Government.
The group – which is almost certain to hand over the franchise to the Government by the end of the year – has also been warned it could lose its two other rail franchises – East Anglia and London commuter service c2c.
As well as facing the possible loss of its rail deals National Express is labouring under a £1.2 billion debt mountain.
Manoj Ladwa, senior trader at ETX Capital, said: “The debt mountain – nearly half of which needs to be refinanced in the next year – will make the new bidder, rumoured to be Stagecoach, very wary. However, since the abandoning of the East Coast Main Line franchise it has become a case of when, not if, National Express gets taken over.”
Aberdeen-based FirstGroup – which had been given a “put up or shut up” deadline on the possible merger – said: “The board of FirstGroup has considered its position in light of these uncertainties and now believes it would be inappropriate to consider a formal offer at this time.”
Cash-strapped National Express had been contracted to run the East Coast franchise until 2015, but saw financial pressure rise as passenger growth stalled in the recession.
The deal lost £20 million in the first half of this year.
Transport Secretary Lord Adonis subsequently announced that a new public organisation – East Coast Main Line Company – would operate the line.
Earlier this month, National Express chief executive Richard Bowker announced he was stepping down from his position at the troubled firm after three years in the role.
In Birmingham, the group has also run into trouble with the building of the flagship £15 million redevelopment of Digbeth coach station after it was stopped in its tracks when the main contractor, Ashford Construction, suddenly ceased trading amid crippling debts. However, National Express has insisted that the new coach station would reopen as planned in November.