The chairman of National Express will this week declare war on Elliott International, the transport group’s second-biggest shareholder, by urging other investors to reject the American hedge fund’s overtures.
Elliott wants National Express to sell out to a rival or break itself up. Last week the hedge fund, which owns a 16.3% stake, renewed its assault by proposing its own three candidates for election to the board at next month’s annual meeting. It also pledged to vote against the re-election of Roger Devlin as a non-executive director.
John Devaney, National Express’s chairman, is expected to write to shareholders asking them to rally behind the board.
Spain’s Cosmen family, which owns 17.2% of National Express and has Jorge Cosmen on the board as deputy chairman, has not yet declared whether it backs Elliott’s candidates.
However, sources suggested that Elliott would not have made its move without getting tacit approval from the Cosmens.
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Devaney will attempt to win wider investor backing with his letter by stating that the National Express management team views Elliott’s move as an abuse of corporate governance. He will also ask investors to approve hotels chief Devlin’s re-election.
National Express is the biggest operator of long-distance coach services in Britain, linking more than 1,000 destinations. It has a strong presence in local buses and rail, as well as operations in Spain and America, where it runs school buses transporting 1m students a day.
However, the group has come under siege from predators since falling victim to the economic slowdown, which forced it to hand the London to Edinburgh East Coast rail franchise back to the government in 2009.
That year, it was forced to tap investors for emergency funding through a £360m rights issue. The American hedge fund bought most of its stake in the fundraising.
Since then, Elliott has been agitating for a change of strategy and wants Dean Finch, the National Express chief executive, to consider merging with a rival or breaking up the business.
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Finch told The Sunday Times it was not clear why the company would be “worth more to somebody else than it is to us”. He added: “There isn’t any magic out there that somebody else can deploy that we aren’t deploying already. If someone else thinks differently, it’s up to them to make an offer to the board.”
It is thought Stagecoach, run by Brian Souter, could be tempted to have another tilt at National Express if Elliott is successful in flushing out bid interest from elsewhere.
A 2009 takeover attempt by a consortium of Stagecoach, CVC and the Cosmens was rebuffed by investors.