17 October 2009

In tatters

It was revealed yesterday morning that the Cosmen Consortium, that had been a 'fag paper's width' away from making a purchase for the National Express Group (NEG), has chosen to walk away from the deal. This had a domino effect on Stagecoach's aspirations to relieve the Consortium of NEG's bus and rail divisions.

"How big is National Express's skeleton?" a friend commented when I made him aware of developments. It's a fair point and a view taken by employees of NEG who've been trying to keep abreast of developments.

The Cosmen family, who were the frontrunners in the Consortium, already hold an 18.5% stake in NEG and were undertaking the necessary 'due diligence' with NEG's books. It is after learning the true debt the group is in that we understand the Consortium as a whole chose to back out. This has thus ended NEG's hopes of a £765 million take-over.

"If NEG's skeleton was that big, having an 18.5% stake in the company would surely be enough to have some idea about it!" was my response. You don't purchase almost one-fifth of a company without having some idea of the state of the books; after all, you're one-fifth responsible for the debt, assumed to be around the £1 billion mark.

And here's another quote: "Although the Cosmen consortium has yet to purchase National Express Group, it's widely seen as a done deal." This is what this blog stated on 5 October, with a mock-up of what the current c2c company could look like with Stagecoach at the helm. The quote here wasn't a spur-of-the-moment one-liner, the Editors tell me it reflected the vast majority of opinion within the transport industry at that time. Consequently, the decision by the Consortium to walk away comes as a pretty big shock - enough to warrant coverage on BBC News.

So, what happens now? NEG will be forced into applying for an emergency rights issue to help cover their mounting debt. Jorges Cosman will have an 18.5% say in how this undertaken. The Consortium now has nothing to offer Stagecoach, who was waiting patiently in the wings, keen to get its hands on National Express East Anglia and c2c - two rail franchises that would prove pivotal during the 2012 London Olympic Games, not to mention the UK's largest stand-alone bus fleet - National Express West Midlands, regarded by many to be in dire need of a shake-up.

The rumour mill has been in action, with commentators claiming 'black holes' in NEG's books scared the Consortium off; that the state of NEG's American bus interests is in particularly poor shape; and even that CVC, the private equity firm that comprised the Consortium, was unable to raise the funds it needed to input. The Consortium has made no official statement as to why it has walked away, though a to-be-expected upbeat NEG statement read: "the board believes that National Express has a strong future as an independently listed company, offering a compelling investment case building on the strength of the individual businesses".

Of course there's nothing stopping any third-party from making yet another offer for the group. (CW)