Jorge Cosmen to quit amid National Express row

Nov 2 2009 The Journal

THE deputy chairman of National Express is expected to resign this week after failing to get merger talks with rival Stagecoach reopened.

Jorge Cosmen, part of Spain’s Cosmen family which holds an 18.5% stake in National Express, had been trying to rally investors into forcing the company to reopen the talks after it walked away from them to pursue a £350m rights issue.

But he is understood to have failed to secure the 51% backing he needed to force the board to agree to the merger.

But if he resigns it is thought his seat on the board could be replaced by another member of the Cosmen family, as it is understood they are entitled to board representation as part of the deal agreed when National Express took over their family business in 2005.

Stagecoach had approached its rival about a possible merger, which would have seen National Express take up to 40% of the enlarged group, which would have been worth around £1.7bn.

But the end of the merger talks led to a public slanging match between the Cosmens and National Express, with the Cosmens voicing “serious concerns over the absence of a well-defined strategy” at the group, while they also accused the board of dismissing the merger too quickly.

The Cosmens, who abandoned their own £765m takeover of the company with private equity firm CVC last month, called on National Express to seek independent advice on its options.

But National Express, which has almost £1bn in debts, defended its decision to walk away and instead pursue a rights issue, due to doubts over whether the merger could be completed before the end of the year. If the merger was not completed in time it would mean a breach of banking covenants, higher costs and “significant uncertainty” for shareholders.

National Express recently warned that profits for this year were below hopes after revenues slowed in the challenging economic conditions.

The firm is currently talking to the Government about the return of its loss-making East Coast Main Line franchise, which it paid too much for at the height of the economic boom and which was reclaimed by the Government in July.