A NEW takeover bid for debt-laden Birmingham transport giant National Express by rival Stagecoach has hit the buffers, it was revealed today.

The bus and rail operator has snubbed a £1.65 billion merger approach from Stagecoach in favour of a proposed £400 million rights issue.

National Express said that following a meeting between advisers to both transport groups it decided it would not be feasible to conclude a successful deal this year.

But Stagecoach said it was “extremely disappointed” by the National Express decision after the Birmingham group had invited the approach.

Stagecoach chief executive Brian Souter made the approach to National Express following the collapse of a £765 million cash bid by private equity company CVC and Spain’s Cosmen family, National Express’s biggest shareholder.

National Express has around £977 million of debts and has to refinance around £490 million of its loans by next September. It will risk breaching banking covenants if it fails to launch a rights issue by the end of the year.

A statement issued by National Express said: “The Board has concluded it is unlikely that a combination with Stagecoach could be successfully executed in 2009, even if appropriate terms could be agreed.

“Accordingly, to avoid any further disruption to the business and to allow the Group to secure the additional equity funding it requires before the end of 2009, all discussions with Stagecoach have now ceased.

“The Board believes it is in shareholders’ best interests that an equity fund-raising be undertaken as soon as possible, and expects to make a further announcement regarding such fund-raising during the course of November 2009.”

The Stagecoach approach had the backing of the Cosmens but was described by National Express as “highly preliminary.” The Birmingham group issued a profits warning last week, thought to be a significant factor in the withdrawal of the CVC bid.

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