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Stagecoach Group PLC has walked away from its all-share merger with larger UK peer National Express Group PLC, opting for a cash offer instead.
The Perth, Scotland-based bus and train operator on Wednesday said its directors unanimously recommend a new £594.9 million cash offer from Pan-European Infrastructure III SCSp, an infrastructure fund managed and advised by DWS Infrastructure.
They no longer recommend a previously agreed all-share merger with Birmingham-based National Express. That deal, struck back in December, would have created a £1.9 billion market-cap public transport provider, though it was being reviewed by the UK Competition & Markets Authority.
DWS will offer Stagecoach shareholders 105 pence in cash, which is a 37% premium to its closing price on Tuesday.
Stagecoach shares were up 36% early Wednesday at 104.20p. National Express shares were up 7.0% at 206.80p.
Under the National Express merger offer, Stagecoach shareholders would have received 0.36 of new National Express share for each Stagecoach share.
Stagecoach Chief Executive Martin Griffiths said the new DWS deal ‘will open a new and exciting chapter’.
‘We also believe it will deliver positive outcomes both now and in the long-term for all of our key stakeholders: the customers and the communities we serve, the people who deliver our high-quality transport services, our partners in national and local government, and the investors who have supported our continued success over many decades,’ he added.
Under the new deal, Stagecoach will remain based in Perth. Under the proposed merger with National Express, the headquarters would have been in Birmingham. The management of Stagecoach also will remain in place.
The DWS offer has acceptance for 10.5% of Stagecoach from shareholder Ann Gloag. It needs 75% for the offer to be declared unconditional. DWS also has signed a memorandum of understanding with the trustees of the Stagecoach pension fund regarding future funding.
DWS and Stagecoach were keen to promote the environmental benefits of the new arrangement, saying DWS will provide Stagecoach with access to capital to fund its transition to net-zero carbon emissions.
DWS was described as a ‘patient long-term infrastructure investor with a proven track record and extensive expertise in unlocking the value of its portfolio companies’. In transport, it has invested in Hansea, a Belgian public bus operator. In the UK, it has invested into Yorkshire Water and Peel Ports.
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