Last updated: October 16, 2009 11:29 pm

National Express plunges as bid dropped

Shares in National Express plunged more than a quarter on Friday after the Spanish-led consortium bidding for the bus and rail operator withdrew its £765m takeover offer, dealing a blow to the company’s biggest shareholder.

CVC, the private equity firm, and the Cosmen family, which owns an 18.5 per cent stake in National Express, had been due to finish due diligence by 5pm on Friday before making a formal offer. Last month the consortium raised its indicative offer from 450p a share to 500p a share.

A Takeover Panel ruling had extended a “put up or shut up” deadline for an offer from September 11.

The consortium is understood to have had concerns over the terms of the refinancing of National Express’s borrowings, including a £490m loan maturing in September next year.

CVC and the Cosmen family had hoped to break up National Express, having agreed to sell the group’s UK rail and bus businesses to Stagecoach, the public transport group, but talks on that deal have now ended. The Department for Transport had also given its tacit approval to the consortium to go ahead.

Shares in National Express fell 119p or 25.3 per cent to 352p in afternoon trading.

Joe Thomas, an analyst at Investec, said “It’s certainly a surprise... most people in the industry thought that the deal would happen in the end... Shares are now down at a level where people are factoring in rights issue so we’re not overly concerned.”

Douglas McNeill, equity analyst at Astaire Securities, said: “It’s likely that the new information that changed CVC’s mind concerned its own banking relationships rather than its target’s business. This is a stark reminder of the perils of dealing with private equity.”

In a statement, National Express said it would now seek to strengthen its balance sheet through an equity fundraising, which it described as “a key objective in order to unlock the inherent value of the group for all shareholders.”

It said the Cosmen family had confirmed its intention to support the fundraising “within certain parameters”. Several shareholders had said they were willing to support to a £350m National Express rights issue, and the company said it would make a further announcement in due course.

National Express became a takeover target after racking up debts of £977m in an aggressive acquisition spree.

But rising unemployment has hit passenger revenues. It has also been stripped of one rail franchise, the London to Edinburgh East Coast line, by the government and its chief executive has yet to be replaced.

The Cosmen family received an initial 9.9 per cent stake in 2005 as part of the £262m National Express paid them for Alsa, their privately held bus and coach operation.

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