Stagecoach agrees rival £595mn offer from DWS in blow to National Express

Stagecoach has received a rival £595mn cash bid from German asset manager DWS, scuppering a takeover offer by National Express for the Scottish bus operator that would have created a UK road transport giant.

A fund managed by DWS Infrastructure said on Wednesday that it agreed to pay 105p in cash for each Stagecoach share at a premium of 37 per cent to its stock price a day earlier. The news sent Stagecoach’s shares soaring on Wednesday by the same amount.

An all share offer in December by National Express valued Stagecoach at about £470mn at the time of the bid. The fresh offer topped the Perth-based bus company’s average share price since the previous offer by almost 20 per cent.

Stagecoach said that its directors have decided unanimously to withdraw from recommending the National Express takeover offer and opt for the DWS Infrastructure bid instead.

The deal requires the support of shareholders with 75 per cent of the company’s stock. Dame Ann Gloag, a founder of the company who still holds 10.5 per cent of shares, gave an irrevocable undertaking to accept. However, directors including her brother and co-founder Brian Souter that hold 14.6 per cent of shares are unable to change their own irrevocable undertakings to accept the National Express offer. If the National Express offer is withdrawn then that group of shareholders would be able to provide acceptances.

National Express acknowledged the bid without providing further comment.

The offer comes as UK bus operators received breathing room last week after the government extended pandemic recovery funds beyond April for six months, helping to keep services going as passenger numbers pick up again.

Investors are optimistic that the national bus strategy, which aims to improve services in England outside of London, and the UK’s goal to reach net zero by 2050, will drive growth for public transport operators.

DWS said that its long-term investment horizon makes it well placed to support Stagecoach’s business and that it has experience in transport through its ownership of Belgian bus operator Hansea.

“DWS Infrastructure will back Stagecoach to rapidly capitalise on the growth opportunities presented by increased public and private investment in UK bus and coach,” said Hamish Mackenzie, head of infrastructure at DWS.

Gerald Khoo, an analyst at Liberum, said the offer was below the price targets of most analysts, suggesting negative implications for the valuations of other British bus companies such as Go-Ahead and FirstGroup.

Souter and Gloag, who founded Stagecoach in 1980 with only two second-hand vehicles, would receive a payout of about £149mn if the deal went through.

“Stagecoach has had a terrific journey for 40 years with the founding family,” said Martin Griffiths, chief executive of Stagecoach. “Sadly they will no longer be part of the journey and it’s good to find a new committed owner.”

Under the plans to merge with National Express, Stagecoach planned to sell Megabus, its low-cost coach unit, and other coach operations to help get the deal past the Competition and Markets Authority.

Stagecoach said that it was unable to update on whether the divestiture would still go ahead.