National Express Group: Jumping Onboard the Stagecoach?

School bus personnel at the second largest school bus contractor in North America must be feeling schizophrenic. Since June, nearly every morning they prepare for work, they have had serious questions as to whom they'll be reporting to by day's end.

Soon, it may be superiors at Stagecoach Group plc.

With a consortium led by majority stakeholder the Cosmen family of Spain having retracted its interest in National Express Group plc, UK competitor Stagecoach has now stepped up as a sole pursuer of company that holds Durham School Services in the United States and Stock Transportation in Canada after a consortium led by National Express' largest shareholder has walked away from the table.

However, what might happen to the school bus business remains to be seen. In fact, a lot remains to be seen. There's been nary a mention of National Express' lucrative school transportation holdings in North America, which are operated by National Express Corporation. And its employees know little more than what was announced in a company memo issued on Sept. 11 by Brian Stock, president and CEO of National Express Corp., that basically gave employees background information on the Cosmen family, which has 11 generations worth of experience in the transportation business dating back to 1728.

It’s been a long and winding road for the company over the past five months. First, FirstGroup plc, the parent company of First Student, made an informal inquiry into purchasing the business after National Express walked away from a lucrative UK east coast rail contract amid cashflow troubles, its stock plunged and its CEO departed. After FirstGroup said it was no longer interested, Jorge Cosmen, the leader of the Spanish transportation mogul family and the 18.5 percent majority stockholder on the National Express board, joined forces with consulting firm CVC Capital Parnters with the designs of a takeover. Different offers resulted, and even Stagecoach was brought into the fray. And now, Stagecoach is the only company still in the running. But it still remains very much up in the air if National Express will be purchased.

The Cosmens’ consortium announced late last week it was no longer interested in pursuing the deal. In a statement made yesterday, the company said it is still exploring the possibility of raising private capital rather than moving on with a sale, though the board “will carefully consider the Stagecoach Proposal whilst continuing to progress its equity funding plans in order to assess whether the Stagecoach Proposal offers greater value and certainty to NEC shareholders.”

According to Bloomberg News, Stagecoach is offering £1.7 billion, or $2.8 billion. As a result, National Express’ stock price gained 11 percent on the London Stock Exchange. But its share price is still down about 60 percent from highs last October.