Recommended All-Share Combination

RNS Number : 5709V

National Express Group PLC

14 December 2021

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO ANY RESTRICTED JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

THE FOLLOWING ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT AND INVESTORS SHOULD NOT MAKE ANY INVESTMENT DECISION IN RELATION TO THE NEW NATIONAL EXPRESS SHARES EXCEPT ON THE BASIS OF THE INFORMATION IN THE SCHEME DOCUMENT, THE PROSPECTUS AND THE CIRCULAR WHICH ARE PROPOSED TO BE PUBLISHED IN DUE COURSE.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

FOR IMMEDIATE RELEASE.

14 December 2021

Recommended All-Share Combination

National Express Group PLC ("National Express") and Stagecoach Group PLC ("Stagecoach")

1. Summary

The Boards of National Express and Stagecoach are pleased to announce that they have reached agreement on the terms of a recommended all-share combination of National Express and Stagecoach, to be effected by means of a court sanctioned scheme of arrangement of Stagecoach under Part 26 of the Companies Act 2006 (the "Combination").

The Combination will create a leading multi-modal transportation provider in the UK market, whilst maintaining a diversified international portfolio of bus, coach and rail services. The Combined Group is expected to have a fleet of around 40,000 vehicles, a workforce of approximately 70,000 people, and with more than a billion passenger journeys made annually on its services.

The Boards of National Express and Stagecoach believe that the Combination is a highly compelling strategic proposition, with significant growth and cost synergies delivering strong value creation for both sets of shareholders as well as substantial benefits to the customers, employees and other stakeholders of both National Express and Stagecoach.

2. Key Terms

Under the terms of the Combination, holders of Stagecoach Shares will be entitled to receive:

0.36 New National Express Shares in exchange for each Stagecoach Share

Following completion of the Combination, Stagecoach Shareholders will own approximately 25 per cent. and National Express Shareholders will own approximately 75 per cent. of the Combined Group on a fully diluted basis.

As at close of business on 20 September 2021 (being the last Business Day before the Possible Offer Announcement), the terms of the Combination represented a premium relative to the price of the Stagecoach Shares of approximately:

· 18.0 per cent. based on respective closing share prices; and

· 23.2 per cent. based on respective last three month volume weighted average share prices.

3. Strategic Rationale for the Combination

The Boards of National Express and Stagecoach believe that the Combination of National Express, the international and diversified public transport operator, with Stagecoach, one of the largest UK bus operators, has a compelling strategic rationale, providing an opportunity for the Combined Group to:

· further build scale and relevance in an increasingly 'bus-friendly' UK market, supported by the £3 billion National Bus Strategy for England as well as measures in Scotland and Wales;

· facilitate an acceleration of the expansion of National Express's growth businesses across the UK, such as commuter, shuttle, private hire coach and accessible transport, across Stagecoach's footprint, as well as deliver other growth and revenue synergies;

· expand across the UK's large urban areas, whilst continuing to enhance strong relationships with key public sector stakeholders and city partners who are aligned on the need for modal shift;

· implement industry-leading environmental and sustainability solutions at scale to deliver high quality, zero-emission public transport, driving customer demand and playing a critical role in delivering government priorities for cleaner, greener and more resilient economies;

· deliver significant operational efficiencies across the combined UK networks, with, for example, National Express Coach utilising Stagecoach's well-located depot network to run and maintain its coach operations; and

· bring the 'best of both' from the combined capabilities of two high quality operators with well-aligned values and collaborative cultures, whilst also delivering significant benefits to customers and passengers, across key aspects of the business including on-board technology and safety; scheduling, network and route planning; and congestion management.

The Combination also provides a compelling opportunity to be a strategic accelerator for the Combined Group, with increased scale and financial flexibility facilitating accelerated growth investment in an attractive and diversified £1.5 billion global pipeline of opportunities, in particular, in National Express's North American and ALSA businesses.

4. Financial Rationale for the Combination

The National Express Board expects that, as a direct result of the Combination, the Combined Group will be able to realise significant run-rate annual pre-tax cost synergies of at least £45 million, with approximately 25 per cent. achieved by the end of the first year, approximately 85 per cent. by the end of the second year and full run rate by the end of the third year following completion of the Combination. It is expected that the realisation of these identified synergies will require one-off costs of up to approximately £40 million, broadly split equally across the first two years following completion of the Combination.

In addition, the National Express Board is confident of the Combined Group realising significant growth and revenue synergies, including accelerating the expansion of National Express's growth businesses across the UK, as well as utilising the expanded UK bus footprint to optimise sales and marketing.

The Boards of National Express and Stagecoach believe that the Combination will result in significant value creation for both sets of shareholders, reflecting a combination of the agreed Exchange Ratio and the significant synergy potential of the Combination.

The Boards of National Express and Stagecoach believe that the Combination will result in a Combined Group that has attractive growth, margins and cash flow generation potential, capable of generating strong and sustainable returns for shareholders.

The Board of National Express believes that the stronger balance sheet of the Combined Group and its enhanced cash flow generation potential will:

· accelerate a reduction towards National Express Group's current 1.5-2.0x gearing target, which it expects to reach during the first full financial year after completion of the Combination, whilst maintaining a strong Baa2/BBB investment grade credit rating;

· generate significant additional capacity for growth investment in an attractive and diversified £1.5 billion global pipeline of opportunities, in particular, in National Express's North American and ALSA businesses; and

· provide enhanced capacity for an attractive and growing dividend.

The Boards of National Express and Stagecoach recognise the importance of shareholder returns. The Board of National Express intends to reinstate an annual dividend as soon as it is appropriate to do so and is targeting reinstatement after completion of the Combination.

The Board of National Express expects the Combination will result in double digit EPS accretion and a double-digit pre-tax return on invested capital, in the first full financial year after completion of the Combination.

5. The Combined Group

Upon completion of the Combination, it is intended that:

· Ray O'Toole, Chairman of Stagecoach, will become Chairman of the Board of the Combined Group, leveraging his prior experience across both businesses, with Sir John Armitt CBE stepping down having been Chairman of National Express since February 2013.

· Jorge Cosmen, Deputy Chairman of National Express, will become Deputy Chairman of the Board of the Combined Group.

· Ignacio Garat and Chris Davies, CEO and CFO respectively of National Express, will become CEO and CFO respectively of the Combined Group.

· The Board of the Combined Group will comprise a combination of National Express and former Stagecoach directors, approximately in proportion to the expected pro forma ownership of the Combined Group. Gregor Alexander and Lynne Weedall, currently independent non-executive directors of Stagecoach, will join the Board of the Combined Group and become chairs of the Combined Group's Audit Committee and Remuneration Committee respectively.

· Tom Stables, CEO of National Express UK and Germany, will become CEO of UK and Germany for the Combined Group. Carla Stockton-Jones, UK Managing Director of Stagecoach, will become the Managing Director of UK Bus for the Combined Group.

6. Transaction Structure and Timetable

It is intended that the Combination will be implemented by way of a court sanctioned scheme of arrangement of Stagecoach under Part 26 of the Companies Act 2006, further details of which are contained in the full text of this Announcement and which will be set out in the Scheme Document. However, National Express reserves the right, with the consent of the Panel, to implement the Combination by way of a takeover offer (as defined in Part 28 of the Companies Act 2006), in accordance with the terms of the Cooperation Agreement.

The Combination will be subject to the Conditions and certain further terms set out in Appendix 1 to this Announcement and to the full terms and conditions which will be set out in the Scheme Document, including the approval of the Scheme by the Scheme Shareholders, the sanction of the Scheme by the Court and the approval of National Express Shareholders. The Conditions include the receipt of prior approval of the Combination from the CMA as described in Part A of Appendix 1 to this Announcement. It cannot be ruled out at this stage that the Combined Group may be required to take remedial action to obtain the CMA's prior approval of the Combination, including the divestiture of businesses, assets or property belonging to the Combined Group.

As a result of its size, the Combination constitutes a Class 1 transaction for National Express for the purposes of the Listing Rules. Accordingly National Express will be required to seek the approval of National Express Shareholders for the Combination at the National Express General Meeting. The Combination will also be conditional on the approval of National Express Shareholders of the issuance of the New National Express Shares at the National Express General Meeting.

The Scheme Document will include full details of the Scheme, together with notices of the Court Meeting and the Stagecoach General Meeting and the expected timetable, and will specify the action to be taken by Scheme Shareholders. It is expected that the Scheme Document will be despatched to Stagecoach Shareholders in late 2022.

National Express will prepare and send to National Express Shareholders the Circular summarising the background to and reasons for the Combination which will include a notice convening the National Express General Meeting. It is expected that the Circular will be posted to National Express Shareholders at the same time as the Scheme Document is posted to Stagecoach Shareholders, expected to be in late 2022.

National Express will also be required to produce a Prospectus in connection with the admission of the New National Express Shares. It is expected that the Prospectus will be combined with the Circular and as such will be one and the same document published at or around the same time as the Scheme Document is posted to Stagecoach Shareholders.

The Scheme is expected to become effective around the end of 2022, subject to the satisfaction or waiver of the Conditions and certain further terms set out in Appendix 1 to this Announcement.

7. Recommendations, Irrevocable Undertakings and Letters of Intent

The Stagecoach Directors, who have been so advised by Deutsche Bank and RBC as to the financial terms of the Combination, consider the terms of the Combination to be fair and reasonable. In providing their financial advice to the Stagecoach Directors, Deutsche Bank and RBC have taken into account the commercial assessments of the Stagecoach Directors.

Accordingly, the Stagecoach Directors intend unanimously to recommend that Stagecoach Shareholders vote in favour of the Scheme at the Court Meeting and the resolutions relating to the Combination at the Stagecoach General Meeting (or in the event that the Combination is implemented by way of an Offer, to accept or procure acceptance of such Offer) as the Stagecoach Directors who hold Stagecoach Shares have irrevocably undertaken to do or procure in respect of their own holdings of 80,577,396 Stagecoach Shares in aggregate and representing approximately 14.6 per cent. of Stagecoach's issued share capital (excluding treasury shares) on 13 December 2021 (being the last Business Day prior to the release of this Announcement).

In addition to the irrevocable undertakings referred to above, National Express has received a letter of intent to vote in favour of the Scheme or accept an Offer (as necessary) and vote in favour of any resolutions which would assist with the implementation of the Combination from Dame Ann Gloag (through HGT Finance A Limited) in respect of a total of 57,661,967 Stagecoach Shares, representing approximately 10.5 per cent. of Stagecoach's issued ordinary share capital (excluding treasury shares) on 13 December 2021 (being the last Business Day prior to the release of this Announcement).

National Express has therefore received irrevocable undertakings and a letter of intent in respect of a total of 138,239,363 Stagecoach Shares representing, in aggregate, approximately 25.1 per cent. of Stagecoach's issued ordinary share capital (excluding treasury shares) on 13 December 2021 (being the last Business Day prior to the release of this Announcement). Further details of these irrevocable undertakings and letter of intent are set out in Appendix 3 to this Announcement.

The National Express Directors consider the Combination to be in the best interests of National Express and the National Express Shareholders as a whole and intend unanimously to recommend that National Express Shareholders vote in favour of all of the resolutions to be proposed at the National Express General Meeting which will be convened in connection with the Combination, as they have irrevocably undertaken to do, or procure, in respect of their own beneficial holdings of 384,559 National Express Shares representing, in aggregate, approximately 0.1 per cent. of National Express's ordinary share capital in issue on 13 December 2021 (being the last Business Day prior to the release of this Announcement).

The National Express Directors have received financial advice from their joint financial advisers, BofA Securities and HSBC, in relation to the Combination. In providing their advice to the National Express Directors, the National Express Joint Financial Advisers have taken into account the National Express Directors' commercial assessment of the Combination.

In addition to the irrevocable undertakings referred to above, National Express has received letters of intent to vote in favour of all of the resolutions to be proposed at the National Express General Meeting from European Express Enterprises Limited and Northern Express Enterprises Limited in respect of a total of 73,967,515 National Express Shares, representing in aggregate approximately 12.0 per cent. of National Express's ordinary share capital in issue on 13 December 2021 (being the last Business Day prior to the release of this Announcement).

National Express has therefore received irrevocable undertakings and letters of intent in respect of a total of 74,352,074 National Express Shares representing, in aggregate, approximately 12.1 per cent. of National Express's ordinary share capital in issue on 13 December 2021 (being the last Business Day prior to the release of this Announcement). Further details of these irrevocable undertakings and letters of intent are set out in Appendix 3 to this Announcement.

Commenting on the Combination, Ignacio Garat, Chief Executive Officer of National Express said:

"The proposed combination of National Express and Stagecoach, and the unique strengths of both companies and their teams, will create a leading multi-modal passenger transport business in the UK, aiming to deliver superb services to customers and forging the way to a carbon free future with a new generation of zero-emission buses and coaches.

The combined group will also benefit from the significant growth and cost synergies and a stronger balance sheet to significantly accelerate growth investment across our diversified international portfolio, aiming to deliver attractive sustainable returns to shareholders."

Commenting on the Combination, Martin Griffiths, Chief Executive of Stagecoach said:

"Our companies have a shared vision around helping to build more sustainable communities and secure a net zero future. We also both have a strong track record of investing in our people and in our services to deliver sector-leading customer service, operational excellence and great value travel.

This is an exciting opportunity to bring together two of the UK's iconic transport brands to create a strong, diverse business that is well-placed to grow the market for greener and smarter public transport for the benefit of all stakeholders."

This summary should be read in conjunction with the full text of this Announcement and the Appendices.

The Combination will be subject to the Conditions and further terms set out in Appendix 1 to this Announcement and to the full terms and conditions which will be set out in the Scheme Document. Appendix 2 contains the sources and bases of certain information used in this summary and this Announcement. Appendix 3 contains details of the irrevocable undertakings received in relation to the Combination that are referred to in this Announcement. Appendix 4 contains the details of and the bases of calculation of the anticipated quantified financial benefits of the Combination. Appendix 5 contains definitions of certain terms used in this summary and this Announcement.

For the purposes of Rule 28 of the Takeover Code, the quantified financial benefits statement contained in this Announcement is the responsibility of National Express and the National Express Directors. Appendix 4 sets out the anticipated quantified financial benefits statement relating to cost savings and synergies arising out of the Combination and provides underlying information and bases of belief. Appendix 4 also includes reports from National Express's reporting accountant, PricewaterhouseCoopers LLP, and its joint financial advisers, BofA Securities and HSBC, in connection with the anticipated quantified financial benefits statement, as required pursuant to Rule 28.1(a) of the Takeover Code, and provides underlying information and bases for the accountant's and advisers' respective reports. Each of PricewaterhouseCoopers LLP, BofA Securities and HSBC has given and not withdrawn its consent to the publication of its report in this Announcement in the form and context in which it is included.

Analyst and investor presentation

National Express will host a presentation for analysts and investors at 10 a.m. (UK time) today to discuss the Combination. Analysts and investors can participate in the conference call by using the access details which will be provided to analysts and investors separately by Maitland/AMO or by contactingMaitland/AMO on natexp-maitland@maitland.co.uk or +44 207 379 5151. There will also be a live webcast on the company website at: https://www.nationalexpressgroup.com/investors/.

Enquiries:

Stagecoach

Ross Paterson, Finance Director	+44 (0) 7714 667 897
Bruce Dingwall, Group Financial Controller	+44 (0) 7917 555 293
Steven Stewart, Director of Corporate Communications	+44 (0) 7764 774680

National Express

Chris Davies, Chief Financial Officer	+44 (0) 121 460 8655
Louise Richardson, Head of Investor Relations	+44 (0) 7827 807766

Advisers

Deutsche Bank (Lead Financial Adviser and Corporate Broker to Stagecoach)	+44 (0) 20 7545 8000
Scott Bell
Oliver Ives
Neil Collingridge
Raed El Dana
RBC (Financial Adviser and Corporate Broker to Stagecoach)	+44 (0) 20 7653 4000
James Agnew
Mark Preston
Mark Rushton
Smithfield Consultants (PR Adviser to Stagecoach)
John Kiely	+44 (0) 20 3047 2476
BofA Securities (Lead Financial Adviser and Corporate Broker to National Express)	+44 (0) 20 7628 1000
David Lloyd
Ed Peel
Justin Anstee
Geoff Iles
HSBC (Financial Adviser and Corporate Broker to National Express)	+44 (0) 20 7991 8888
Anthony Parsons
Sam Mclennan
Jon Connor
Alex Thomas
Maitland/AMO (PR Adviser to National Express)
Neil Bennett	+44 (0)20 7379 5151
James McFarlane	+44 (0)7584 142665

Ashurst LLP is acting as legal adviser to National Express and Herbert Smith Freehills LLP is acting as legal adviser to Stagecoach in connection with the Combination.

Further Information

This Announcement is for information purposes only and is not intended to and does not constitute or form part of an offer, invitation or the solicitation of an offer or invitation to purchase, or otherwise acquire, subscribe for, sell or otherwise dispose of any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Combination or otherwise nor shall there be any sale, issuance or transfer of securities of National Express or Stagecoach pursuant to the Combination in any jurisdiction in contravention of applicable laws. The Combination will be implemented solely pursuant to the terms of the Scheme Document (or, in the event that the Combination is to be implemented by means of an Offer, the Offer Document), which will contain the full terms and conditions of the Combination, including details of how to vote in respect of the Combination by Stagecoach Shareholders. Any decision by Stagecoach Shareholders in respect of, or other response to, the Combination should be made on the basis of the information contained in the Scheme Document and the Prospectus.

National Express will prepare the Circular to be distributed to National Express Shareholders and will also publish the Prospectus containing information on the New National Express Shares and the Combined Group. Stagecoach and National Express urge Stagecoach Shareholders to read the Scheme Document and the Prospectus carefully when they become available because they will contain important information in relation to the Combination, the New National Express Shares and the Combined Group.

National Express urges National Express Shareholders to read the Prospectus and the Circular carefully when they become available.

Any vote in respect of resolutions to be proposed at the Stagecoach Meetings or the National Express General Meeting to approve the Combination, the Scheme or related matters, should be made only on the basis of the information contained in the Scheme Document (in the case of the Stagecoach Shareholders), the Prospectus and the Circular (in the case of the National Express Shareholders).

This Announcement does not constitute a prospectus or prospectus equivalent document.

Information Relating to Stagecoach Shareholders

Please be aware that addresses, electronic addresses and certain other information provided by Stagecoach Shareholders, persons with information rights and other relevant persons for the receipt of communications from Stagecoach may be provided to National Express during the Offer Period as required under Section 4 of Appendix 4 of the Takeover Code.

Overseas Jurisdictions

The release, publication or distribution of this Announcement in or into jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe any applicable legal or regulatory requirements. In particular, the ability of persons who are not resident in the United Kingdom to vote their Stagecoach Shares with respect to the Scheme at the Court Meeting, or to execute and deliver forms of proxy appointing another to vote at the Court Meeting on their behalf, may be affected by the laws of the relevant jurisdictions in which they are located. Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law the companies and persons involved in the Combination disclaim any responsibility or liability for the violation of such restrictions by any person. This Announcement has been prepared for the purpose of complying with English law and the Takeover Code and the information disclosed may not be the same as that which would have been disclosed if this Announcement had been prepared in accordance with the laws of jurisdictions outside the United Kingdom.

Unless otherwise determined by National Express or required by the Takeover Code, and permitted by applicable law and regulation, the New National Express Shares to be issued pursuant to the Combination to Stagecoach Shareholders will not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in favour of the Combination by any such use, means, instrumentality or form within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Accordingly, copies of this Announcement and any formal documentation relating to the Combination are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from any Restricted Jurisdiction or any other jurisdiction where to do so would constitute a violation of the laws of that jurisdiction, and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send such documents in or into or from any Restricted Jurisdiction. Doing so may render invalid any related purported vote in respect of the Combination. If the Combination is implemented by way of an Offer (unless otherwise permitted by applicable law and regulation), the Offer may not be made directly or indirectly, in or into, or by the use of mails or any means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of any Restricted Jurisdiction and the Offer may not be capable of acceptance by any such use, means, instrumentality or facilities or from within any Restricted Jurisdiction.

The availability of New National Express Shares pursuant to the Combination to Stagecoach Shareholders who are not resident in the United Kingdom or the ability of those persons to hold such shares may be affected by the laws or regulatory requirements of the relevant jurisdictions in which they are resident. Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable legal or regulatory requirements. Stagecoach Shareholders who are in doubt about such matters should consult an appropriate independent professional adviser in the relevant jurisdiction without delay.

Further details in relation to Stagecoach Shareholders in overseas jurisdictions will be contained in the Scheme Document.

The Combination will be subject to the applicable requirements of the Takeover Code, the Panel, the London Stock Exchange and the Financial Conduct Authority (the "FCA").

Additional Information for US Investors

The Combination relates to the shares of a Scottish company and is proposed to be effected by means of a scheme of arrangement under Part 26 of the Companies Act 2006 that will be governed by Scots law. A transaction effected by means of a scheme of arrangement is not subject to the tender offer rules or the proxy solicitation rules under the US Exchange Act. Accordingly, the Combination is subject to the disclosure requirements and practices applicable in the United Kingdom to schemes of arrangement which differ from the disclosure requirements of United States tender offer and proxy solicitation rules. If, in the future, National Express exercises the right to implement the Combination by way of an Offer and determines to extend the Offer into the United States, the Combination will be made in compliance with applicable United States laws and regulations. Financial information included in this Announcement and the Scheme Document has been or will have been prepared in accordance with accounting standards applicable in the United Kingdom that may not be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the United States.

It may be difficult for US holders of Stagecoach Shares to enforce their rights and any claim arising out of the US federal laws, since Stagecoach and National Express are located in a non-US jurisdiction, and some or all of their officers and directors may be residents of a non-US jurisdiction. US holders of Stagecoach Shares may not be able to sue a non-US company or its officers or directors in a non-US court for violations of the US securities laws. Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's judgement.

The New National Express Shares to be issued pursuant to the Scheme have not been and will not be registered under the US Securities Act or the securities laws of any state or other jurisdiction of the United States and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the US Securities Act and such other laws. It is expected that any New National Express Shares to be issued pursuant to the Scheme would be issued in reliance upon the exemption from the registration requirements of the US Securities Act provided by Section 3(a)(10) thereof. Securities issued pursuant to the Scheme will not be registered under any US state securities laws and may only be issued to persons resident in a state pursuant to an exemption from the registration requirements of the securities laws of such state.

Important Notices Relating to the Financial Advisers

Deutsche Bank is a joint stock corporation incorporated with limited liability in the Federal Republic of Germany, with its head office in Frankfurt am Main where it is registered in the Commercial Register of the District Court under number HRB 30 000. Deutsche Bank is authorised under German banking law. The London branch of Deutsche Bank AG is registered in the register of companies for England and Wales (registration number BR000005) with its registered address and principal place of business at Winchester House, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank is authorised and regulated by the European Central Bank and the German Federal Financial Supervisory Authority (BaFin). With respect to activities undertaken in the UK, Deutsche Bank is authorised by the Prudential Regulation Authority ("PRA") with deemed variation of permission. It is subject to regulation by the FCA and limited regulation by the PRA. Details about the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the FCA's website. Deutsche Bank is acting exclusively as financial adviser to Stagecoach and no one else in connection with the matters described in this Announcement and will not be responsible to anyone other than Stagecoach for providing the protections afforded to clients of Deutsche Bank nor for providing advice in connection with the subject matter of this Announcement or any other matter referred to in this Announcement.

RBC, which is authorised by the PRA and regulated by the FCA and the PRA in the United Kingdom and is a wholly owned subsidiary of Royal Bank of Canada, is acting for Stagecoach and no one else in connection with the matters referred to in this Announcement and will not be responsible to anyone other than Stagecoach for providing the protections afforded to clients of RBC, or for providing advice in connection with matters referred to in this Announcement. Neither RBC nor its parent nor any of its subsidiaries or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of RBC in connection with this Announcement or any matter referred to herein.

BofA Securities, which is authorised by PRA and regulated by the FCA and the PRA in the United Kingdom, is acting as financial adviser exclusively for National Express and for no one else and will not be responsible to anyone other than National Express for providing the protections afforded to its clients or for providing advice in relation to the matters referred to in this Announcement. Neither BofA Securities, nor any of its affiliates, owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of BofA Securities in connection with this Announcement, any statement contained herein or otherwise.

HSBC, which is authorised by the PRA and regulated in the United Kingdom by the FCA and the PRA, is acting as financial adviser to National Express and no one else in connection with the matters described in this Announcement and will not be responsible to anyone other than National Express for providing the protections afforded to clients of HSBC, or for providing advice in connection with the matters referred to herein. Neither HSBC nor any of its group undertakings or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of HSBC in connection with this Announcement or any matter referred to herein.

Cautionary Note Regarding Forward Looking Statements

This Announcement (including information incorporated by reference into this Announcement), oral statements regarding the Combination and other information published by National Express and Stagecoach contain certain forward looking statements with respect to the financial condition, strategies, objectives, results of operations and businesses of National Express and Stagecoach and their respective groups and certain plans and objectives with respect to the Combined Group. These forward looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of National Express and Stagecoach about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward looking statements. The forward looking statements contained in this Announcement include statements relating to the expected effects of the Combination on National Express and Stagecoach, the expected timing and scope of the Combination and other statements other than historical facts. Forward looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "hope", "aims", "continue", "will", "may", "should", "would", "could", or other words of similar meaning. These statements are based on assumptions and assessments made by National Express, and/or Stagecoach in light of their experience and their perception of historical trends, current conditions, future developments and other factors they believe appropriate. By their nature, forward looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future and the factors described in the context of such forward looking statements in this Announcement could cause actual results and developments to differ materially from those expressed in or implied by such forward looking statements. Although it is believed that the expectations reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and readers are therefore cautioned not to place undue reliance on these forward looking statements.

There are several factors which could cause actual results to differ materially from those expressed or implied in forward looking statements. Among the factors that could cause actual results to differ materially from those described in the forward looking statements are changes in the global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions. For a discussion of important factors which could cause actual results to differ from forward looking statements in relation to National Express Group or Stagecoach Group, refer to the annual report and accounts of National Express Group for the financial year ended 31 December 2020 and of Stagecoach Group for the financial year ended 1 May 2021, respectively.

Each forward looking statement speaks only as at the date of this Announcement. Neither National Express nor Stagecoach, nor their respective groups assumes any obligation to update or correct the information contained in this Announcement (whether as a result of new information, future events or otherwise), except as required by applicable law.

No Profit Forecasts or Estimates

No statement in this Announcement (including any statement of estimated synergies) is intended as a profit forecast or estimate for any period and no statement in this Announcement should be interpreted to mean that earnings or earnings per share or dividend per share for National Express, Stagecoach or the Combined Group, as appropriate, for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share or dividend per share for National Express, Stagecoach or the Combined Group as appropriate.

Quantified Financial Benefits Statement

The statements in the Quantified Financial Benefits Statement relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies and which may in some cases be subject to consultation with employees or their representatives. The synergies and cost savings referred to may not be achieved, or may be achieved later or sooner than estimated, or those achieved could be materially different from those estimated. For the purposes of Rule 28 of the Takeover Code, the Quantified Financial Benefits Statement contained in this Announcement is the responsibility of National Express and the National Express Directors.

Dealing and Opening Position Disclosure Requirements

Under Rule 8.3(a) of the Takeover Code, any person who is interested in one per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the Offer Period and, if later, following the announcement in which any securities exchange offeror is first identified.

An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th Business Day following the commencement of the Offer Period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10th Business Day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes, interested in one per cent. or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the Business Day following the date of the relevant dealing. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4). Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the Offer Period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Publication on website and availability of hard copies

A copy of this Announcement is and will be available, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, for inspection on National Express's website https://www.nationalexpressgroup.com/investors/possible-combination/ and on Stagecoach's website http://www.stagecoachgroup.com/investors.aspx by no later than 12 noon (London time) on the Business Day following this Announcement. For the avoidance of doubt, the contents of the websites referred to in this Announcement are not incorporated into and do not form part of this Announcement.

National Express Shareholders may request a hard copy of this Announcement by contacting National Express's registrars, Equiniti Limited, between 8.30 a.m. and 5.30 p.m. (London time) Monday to Friday (except public holidays in England and Wales) on 0371 384 2152 from within the UK or +44 (0)121 415 7047 if calling outside the UK or by submitting a request in writing to Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, United Kingdom. International rates apply to calls from outside the UK. Calls may be recorded and Equiniti Limited cannot provide advice on the merits of the Combination or give any financial, legal or tax advice. For persons who receive a copy of this Announcement in electronic form or via a website notification, a hard copy of this Announcement will not be sent unless so requested.

Stagecoach Shareholders may request a hard copy of this Announcement by contacting Link Group, Stagecoach Group Share Register at 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL or by telephoning +44 (0)371 664 0443 or by emailing StagecoachGroup@linkgroup.co.uk.

If you are in any doubt about the contents of this Announcement or the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank manager, solicitor, accountant or independent financial adviser duly authorised under the FSMA if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

Rounding

Certain figures included in this Announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

FOR IMMEDIATE RELEASE.

14 December 2021

Recommended All-Share Combination

National Express Group PLC ("National Express") and Stagecoach Group PLC ("Stagecoach")

1. Introduction

2. The Combination

Under the terms of the Combination, which will be subject to the Conditions and further terms set out in this Announcement and to the full terms and conditions which will be set out in the Scheme Document, Stagecoach Shareholders will be entitled to receive:

0.36 New National Express Shares in exchange for each Stagecoach Share

The New National Express Shares will be issued credited as fully paid and will rank pari passu in all respects with the National Express Shares in issue at the time the New National Express Shares are issued pursuant to the Combination, including the right to receive and retain dividends and other distributions declared, made or paid by reference to a record date falling after the Effective Date. Applications will be made to the FCA for the New National Express Shares to be admitted to the Official List and to the London Stock Exchange for the New National Express Shares to be admitted to trading on the London Stock Exchange's Main Market.

In the event that the Combination is to be implemented by way of a takeover offer (as defined in Part 28 of the Companies Act 2006), the Stagecoach Shares will be acquired pursuant to the Offer fully paid and free from all liens, charges, equitable interests, encumbrances and rights of pre-emption and any other interests of any nature whatsoever and together with all rights attaching thereto.

If Stagecoach announces, declares or pays any dividend or any other distribution to Stagecoach Shareholders on or after the date of this Announcement, National Express reserves the right to make an equivalent reduction to the terms of the Combination.

3. Background to and reasons for the Combination

National Express Vision, Purpose and Strategy

National Express's vision is to be the world's premier shared mobility operator with services offering leading safety, reliability and environment standards that customers trust and value. National Express's vision is rooted in a belief that driving modal shift from cars to high quality mass transit is fundamental to a safe, green and prosperous future.

National Express's purpose is to help lead this modal shift by making mass transit an increasingly attractive option for all our customers, whether they are individuals, transport authorities, school boards or businesses. We seek to do this by earning our customers' loyalty by providing safe, reliable and great value multi-modal services on clean and green vehicles.

The Board of National Express believes that the existing National Express Group's diverse and balanced international portfolio of cash generative businesses comprises well established, digitally enabled, operations in sustainable, attractive and growing markets with good management teams and access to multiple growth opportunities.

National Express's growth opportunities are long-term, sustainable and structural, driven by the necessary and government supported modal shift towards green and efficient public transport.

National Express is well positioned to leverage this growth opportunity with five compelling customer propositions including:

· a focus on reinvigorating public transport , seeking to grow the use of public transport in cities by building partnerships with stakeholders who want sustainable solutions;

· driving multi-modal expansion , by building more modal capability and city hubs from existing locations where National Express already has a physical footprint;

· delivering operational transformation , through the application of what it believes are best-in-class processes and know-how to drive efficiency, operational improvement and lower costs;

· filling the transit gap , by encouraging modal shift away from private cars in areas that are not well served by public mass transit; and

· an ability to consolidate and compound, consolidating fragmented markets and creating 'at scale' operations to drive operating efficiencies and better customer solutions.

These five customer propositions, which are enabled by focused application of technology, seek to deliver superior outcomes for all National Express's stakeholders including being:

· the safest: leading the industry in safety by continually driving down accidents;

· the most reliable: leading the industry in reliability by striving for ever increasing levels of punctuality, and driving down cancelled services and lost miles;

· the environmental leader: leading the transition to zero-emission vehicles;

· the most satisfied customers: with its customers rating National Express the highest in the industry; and

· the employer of choice: embedding a high performance culture that attracts and retains the best people.

National Express's key strengths include:

· operating a uniquely diversified and balanced international portfolio of businesses, by geography, mode and regulatory framework, with leading positions and high market share in several attractive and growing international markets;

· a high proportion of recurring revenue from established contract markets, with about half of National Express Group revenues anchored in long-term contracts and concessions, and high contract retention rates;

· strong relationships with public sector stakeholders , alongside a deep understanding of, and expertise in, managing regulated concessions;

· an opportunity to compound growth through organic and inorganic expansion and multi-modal in-market consolidation;

· leadership in sustainability and environmental standards , with an ambition to be the world's greenest mass transit operator and targeting industry leadership on the shift to solely zero-emission vehicles;

· a differentiated strategy which looks to deliver market leading service performance, consistent revenue growth, continuous cost efficiency improvement, strong margins and returns and sustainable free cash flow growth; and

· a strong track record of delivering superior shareholder outcomes.

The Board of National Express believes it is an exciting time to be a public transport operator, with favourable demographics, public transport supporting social mobility, pent-up demand for travel, strong government support and delivering modal shift which is key to global decarbonisation.

Compelling Strategic and Financial Rationale

The Combination of National Express and Stagecoach is consistent with National Express's growth strategy, creating a leading multi-modal transportation provider in the UK market, whilst maintaining a diversified and balanced international portfolio of bus, coach and rail services. The Combined Group is expected to have a fleet of around 40,000 vehicles, a workforce of approximately 70,000 people, and more than a billion passenger journeys made annually on its services.

The Boards of National Express and Stagecoach believe the Combination is a highly compelling strategic proposition, with significant growth and cost synergies, delivering strong value creation for both sets of shareholders as well as substantial benefits to the customers, employees and other stakeholders of both National Express and Stagecoach.

The Boards of National Express and Stagecoach believe the Combination provides a compelling strategic opportunity to:

· further build scale and relevance in an increasingly 'bus-friendly' UK market, supported by the £3 billion National Bus Strategy for England as well as measures in Scotland and Wales;

· facilitate an acceleration of the expansion of National Express's growth businesses across the UK;

· expand across the UK's large urban areas whilst continuing to enhance strong relationships with key public sector stakeholders and city partners who are aligned on the need for modal shift;

· implement industry-leading environmental and sustainability solutions at scale;

· deliver significant operational efficiencies across the combined UK networks; and

· bring the 'best of both' from the combined capabilities of two high quality operators with well-aligned values and collaborative cultures.

In addition, the National Express Board believes the Combination provides a compelling financial opportunity to:

· provide a stronger pro forma balance sheet, accelerating a reduction towards National Express Group's current 1.5-2.0x gearing target;

· deliver significant growth and cost synergies;

· be a strategic accelerator for the Combined Group with increased scale and financial flexibility to facilitate accelerated growth investment in an attractive and diversified £1.5 billion global pipeline of opportunities, in particular, in National Express's North American and ALSA businesses;

· achieve financially compelling earnings accretion, returns and value creation; and

· provide enhanced capacity for an attractive and growing dividend.

Further build scale and relevance in an increasingly 'bus-friendly' UK market, supported by the £3 billion National Bus Strategy for England as well as measures in Scotland and Wales

Stagecoach is a leading UK bus operator with an approximate 26 per cent. share of the UK bus market (excluding London) with major city bus operations in Manchester, Liverpool, Newcastle, Hull, Sheffield, Oxford and Cambridge, as well as an approximate 14 per cent. share of the London bus market. National Express is a market leader in the West Midlands bus market, the largest urban bus market outside of London, as well as being the largest UK scheduled coach network in the UK.

The National Express Board believes that the Combination will create a stronger platform, driving scale, influence and relevance, supported by the recently unveiled National Bus Strategy with £3 billion of investment in the industry supporting the modal shift towards public transport. The UK government's new bus strategy seeks to see passengers across England benefiting from more frequent, more reliable, easier to use and understand, better co-ordinated and cheaper bus services, with levelling up services across the country encouraging more people to use the bus, rather than the car, as the country builds back better from the COVID-19 pandemic. The government expects many councils to choose enhanced partnerships, where local authorities work closely with bus companies, drawing on their operating knowledge and marketing skills.

The Boards of National Express and Stagecoach believe that the Combined Group will be well-placed to help deliver on the government's most ambitious reforms to the sector in a generation.

Facilitate an acceleration of the expansion of National Express's growth businesses across the UK

The Combination provides an attractive opportunity to accelerate the regional expansion of National Express's growth businesses in the UK, including commuter, shuttle, private hire coach and accessible transport, by leveraging the National Express platform, brand and reputation for customer service and safety, with Stagecoach's national UK footprint and capabilities.

The National Express Board believes there is a significant opportunity to accelerate the growth of National Express Transport Solutions ("NETS"), National Express's private hire non-scheduled coach operations, through the utilisation of Stagecoach's broad depot footprint of large regional hubs and smaller sites where there is spare capacity. Since its acquisition of Kings Ferry in 2007, National Express has acquired a number of private coach hire businesses and is now the second largest operator in the UK, with a number of businesses covering the commuter, shuttle, private coach hire and holidays markets. These businesses operate under one brand, NETS, leveraging the National Express brand and reputation to win new business and offer a one-stop shop solution to customers in what is a highly fragmented market worth up to approximately £3.8 billion. National Express believes there is significant demand for these services in areas that it currently does not serve, with access to spare capacity in Stagecoach's depot network across a number of key locations, enabling the rapid acceleration of National Express's NETS strategy.

Additionally, National Express's accessible transport business, will also benefit from the expansion that access to a national UK footprint will bring. This business has been successful in the West Midlands, recently winning attractive contracts in surrounding areas. National Express believes that the highly fragmented accessible transport market is worth approximately £1.1 billion per year in the UK currently, having grown at an average annual rate of approximately 8 per cent. per annum since 2016. It is already the second largest operator and National Express believes it is one of the very few providers that can balance a competitive offer with safety and quality, with a clear opportunity for it to become market leader. The application of technology provides a clear source of competitive advantage enabling the business to position itself as the safest and most reliable partner, with an opportunity to drive significant organic growth in this market going forward. National Express believes the broader footprint offered by the Combined Group will enable the business to win further contracts in areas which National Express's current physical infrastructure does not support and has identified a number of near-term opportunities across major UK cities.

Stagecoach Group also brings a track record of delivering major contracts (including transport solutions for the 2012 Summer Olympics in London and the COP26 summit in Glasgow).

Expand across the UK's large urban areas whilst continuing to enhance strong relationships with key public sector stakeholders and city partners who are aligned on the need for modal shift

National Express believes that its emphasis on building strong partnerships with key public sector stakeholders is delivering benefits for all stakeholders, with, for example, the UK bus business continuing to maintain and build on its strong relationships with Transport for West Midlands ("TfWM"), including through the 'Bus Alliance', and its existing enhanced partnership with the West Midlands Mayor, and demonstrated through its recent expansion into accessible transport. This partnership approach continues to be a key driver for delivering a combination of superior service standards and customer offering together with profitable growth, including for example, working with the West Midlands Mayor and TfWM to establish a credible plan to tackle congestion, promote bus prioritisation, transition to zero-emission vehicles and enable an improved network structure.

National Express recognises the strength of the relationships Stagecoach has with national government agencies and local public authorities, and expects the Combined Group to continue and enhance these relationships, applying key learnings from stakeholder management from across National Express and Stagecoach businesses.

National Express will also look to work in partnership with local authorities, within existing legal frameworks, to optimise the efficient delivery of local bus services, further rolling out the successful model National Express has established with TfWM to additional regions and benefitting both local authorities and bus passengers.

Implement industry-leading environmental and sustainability solutions at scale

The Board of National Express remains resolute in its commitment to target industry leadership in sustainability and environmental standards, with an ambition to be the world's greenest mass transit operator and targeting industry leadership on the shift to solely zero-emission vehicles. To deliver this ambition, National Express's targets include never to buy a diesel bus again in the UK, and an ambition for its UK bus operations to be zero-emissions by 2030, UK Coach by 2035, ALSA Bus by 2035, ALSA Coach by 2040, ALSA Morocco by 2040 and North America by 2040. National Express has a 2040 Scope 1 and 2 emissions net zero target.

National Express intends to review and roll out similarly stretching ambitions across the Combined Group's UK business, retaining National Express's ambition to be the world's greenest mass transit operator.

The Board of National Express believes its model of zero-emission vehicle replacement, through 'availability contracts' (whereby electric buses would be provided as a service on an availability basis, avoiding up-front capital expenditure), can be implemented at scale and drive modal shift. This entails benefits for all stakeholders including:

· Passengers: driving customer demand from a more modern, cost effective, environmentally friendly fleet encouraging a positive move away from the car;

· Cities: with cleaner air and lower congestion delivered faster and at scale;

· Manufacturers: providing a clearer pathway to mass implementation and driving down production costs;

· Government: accelerating the move towards zero-emission vehicles; and

· Shareholders of the Combined Group: with better economics than diesel.

Deliver significant operational efficiencies across the combined UK networks

The management teams of National Express and Stagecoach have identified several meaningful opportunities to harness the Combined Group's collective expertise and combined UK footprint to deliver significant operational efficiencies.

This includes, in particular, the ability of National Express UK Coach to utilise Stagecoach's well-located UK depot network to run and maintain its coach operations with enhanced operational flexibility (such as removal of 'double-manning' (running two drivers on board), 'dead mileage' (empty legs to and from depots) and reducing spare vehicle capacity) as well as for repair and maintenance. National Express will seek to operate a combination of both 'in-sourced' coach operations alongside utilising other high-quality third-party operators with long-standing relationships with National Express.

Bring the 'best of both' from the combined capabilities of two high quality operators with well-aligned values and collaborative cultures

National Express believes that combining the strengths of both Stagecoach and National Express will create a leading multi-modal transportation provider in the UK market with a reputation for safety, reliability, environmental leadership, customer satisfaction and being an employer of choice. The Boards of National Express and Stagecoach believe both businesses have well-aligned values and collaborative cultures.

National Express believes that best practices from the combined operational, technological and engineering capabilities can be deployed across the Combined Group, enabling significant efficiencies and operational improvements. This includes the potential for enhanced scheduling, data analytics and network optimisation across scheduled and un-scheduled bus services, the implementation of best-in-class engineering and process improvements, enhanced technology and innovation including on-board systems; delivering environmental and safety leadership; sizeable procurement savings and efficiencies and the removal of duplicative systems and costs across the Combined Group.

National Express believes the Combination will deliver considerable benefits to customers who will have the opportunity to access frequent bus and coach services across the UK, delivered by a modern, comfortable and environmentally friendly fleet, with flexible ticketing payment options, and access to enhanced customer engagement technologies and apps.

Furthermore, employees of the Combined Group will benefit from the increased opportunities offered by the market leader in UK transport, including increased opportunities for training and development as well as further career path flexibility.

The Combined Group will also represent a strong pensions covenant, with Stagecoach pension scheme participants benefiting from the security of a leading and internationally diversified transport operator with stable contracted revenues across geographies and markets.

Stronger balance sheet, accelerating a reduction towards National Express Group's current 1.5-2.0x gearing target

The Board of National Express believes that the stronger balance sheet of the Combined Group, with lower leverage than National Express on a standalone basis, and its enhanced cash flow generation potential, will accelerate a reduction towards National Express Group's current 1.5-2.0x gearing target, which it expects to reach during the first full financial year after completion of the Combination, whilst maintaining a strong Baa2/BBB investment grade credit rating.

Significant growth and cost synergies

The Board of National Express believes that as a direct result of the Combination, the Combined Group will be able to realise significant synergies, delivering attractive value for both sets of shareholders.

National Express has, to date, identified annual pre-tax cost synergies that are expected to reach a run-rate of at least £45 million, with approximately 25 per cent. achieved by the end of the first year, approximately 85 per cent. by the end of the second year and full run-rate by the end of the third year following completion of the Combination.

The potential sources of quantified cost synergies include:

(a) approximately 25 per cent. from network efficiencies and optimisation, including enabling National Express Coach to utilise Stagecoach's well-located depot network with enhanced operational flexibility (such as removal of 'double-manning', 'dead mileage' and spare vehicle capacity) as well as for repair and maintenance;

(b) approximately 35 per cent. from shared operational best practice across the combined UK bus network, including:

(i) rolling-out industry-leading on-board technology systems (such as DriveCam), which National Express believes will maintain high safety, excellent reliability for customers and staff, and reduce insurance costs;

(ii) combined and enhanced scheduling, network and route planning to improve efficiencies and reduce overall mileage;

(iii) enhancing the technology offering across the Combined Group, including migration to 'best-in-class' apps to provide an optimised customer experience; and

(iv) additional adoption of operational best practices including best-in-class engineering, process improvement and other efficiencies.

(i) rationalisation of duplicate plc costs, back office and IT processes, digital savings and combined procurement; and

(ii) the potential for non-depot property and office footprint rationalisation.

It is expected that the realisation of these identified synergies will require one-off costs of up to approximately £40 million, broadly split equally across the first two years following completion of the Combination.

In addition, National Express is confident of the Combined Group realising significant growth and revenue synergies, that cannot be quantified for reporting under the Takeover Code at this time, including:

· accelerating the regional expansion of National Express's growth businesses, such as private hire coach, corporate shuttle and accessible transport, across Stagecoach's UK footprint ; and

· utilising the expanded UK bus footprint to optimise sales and marketing, including improvements in potential long-term available funding.

The synergies are expected to be recurring and are expected to arise as a direct result of the Combination and could not be achieved independently of the Combination. The synergies are also stated net of anticipated dis-synergies. For the avoidance of doubt, the pre-tax cost impact of the synergies as set out above already reflects the impact of these identified dis-synergies.

Further information on the bases of belief supporting the Quantified Financial Benefits Statement, including the principal assumptions and sources of information, is set out in Part A of Appendix 4 to this Announcement. These estimated cost synergies have been reported on under the Takeover Code by PricewaterhouseCoopers LLP, and by each of the National Express Joint Financial Advisers. Copies of their letters are included in Parts B and C of Appendix 4. References in this Announcement to those estimated synergies should be read in conjunction with those parts of Appendix 4.

Strategic accelerator for the Combined Group with increased scale and financial flexibility to facilitate accelerated growth investment

The Board of National Express believes a stronger pro forma balance sheet coupled with the significant growth and cost synergies will generate significant additional capacity for growth investment in an attractive and diversified £1.5 billion global pipeline of opportunities, in particular, in National Express's North American and ALSA businesses.

The Board of National Express believes the Combined Group will have additional capacity for growth investment of at least £500 million between 2022 and 2027, enabling the Combined Group to target at least £1.5 billion of revenue growth and at least £200 million of EBIT growth over the same period.

The Board of National Express believes that there will be attractive opportunities to strengthen and invest in the future growth of the business as public transport markets continue to recover post the COVID-19 disruption. National Express is seeing a number of growth opportunities as existing and potential new customers seek a financially secure and reliable operating partner. As with recent contract wins, many of these contracts require upfront investment, and National Express believes, will generate strong, stable returns for the business for many years to come. Some of these potential opportunities include school boards looking to outsource for the first time, corporates looking for dedicated shuttle services for staff, and city authorities looking to National Express to take over the provision of bus services. National Express believes that the scale and strength of the Combined Group will ensure it can continue to deliver these exciting growth opportunities.

The Combined Group will also continue to selectively pursue other international growth opportunities, leveraging the best of both National Express's and Stagecoach's expertise in identifying market opportunities, building relationships with global partners and bidding efficiently for selected profitable and return enhancing opportunities.

Compelling earning accretion, returns and value creation

Enhanced capacity for an attractive and growing dividend

The Combined Group's capital allocation policy will aim to achieve a balance between reinvesting in the business for future growth (aiming to deliver an annualised return of at least 15 per cent.), reducing to and maintaining gearing within National Express Group's current target range of 1.5x to 2.0x EBITDA and paying an attractive and growing dividend to shareholders (which is at least two times covered).

The Board of National Express believes that the stronger balance sheet of the Combined Group and its enhanced cash flow generation potential will provide greater capacity for an attractive and growing dividend. The Boards of National Express and Stagecoach recognise the importance of shareholder returns. The Board of National Express intends to reinstate an annual dividend as soon as it is appropriate to do so and is targeting reinstatement after completion of the Combination.

4. Recommendations

Accordingly, the Stagecoach Directors intend unanimously to recommend that Stagecoach Shareholders vote in favour of the Scheme at the Court Meeting and the resolutions relating to the Combination at the Stagecoach General Meeting (or in the event that the Combination is implemented by way of an Offer, to accept or procure acceptance of such Offer) as the Stagecoach Directors who hold Stagecoach Shares have irrevocably undertaken to do or procure in respect of their own holdings of 80,577,396 Stagecoach Shares in aggregate and representing approximately 14.6 per cent. of Stagecoach's issued share capital on 13 December 2021 (being the last Business Day prior to the release of this Announcement). Further details of these irrevocable undertakings are set out in Appendix 3 to this Announcement.

As a result of its size, the Combination constitutes a Class 1 transaction for National Express for the purposes of the Listing Rules. Accordingly, National Express will be required to seek the approval of National Express Shareholders for the Combination at the National Express General Meeting. The Combination will also be conditional on the approval of National Express Shareholders of the issuance of New National Express Shares at the National Express General Meeting. The National Express Directors consider the Combination to be in the best interests of National Express and the National Express Shareholders as a whole and intend unanimously to recommend that National Express Shareholders vote in favour of all of the resolutions to be proposed at the National Express General Meeting which will be convened in connection with the Combination, as they have irrevocably undertaken to do, or procure, in respect of their own beneficial holdings of 384,559 National Express Shares representing, in aggregate, approximately 0.1 per cent. of National Express's ordinary share capital in issue on 13 December 2021, being the last Business Day prior to the release of this Announcement.

The National Express Directors have received financial advice from BofA Securities and HSBC, the National Express Joint Financial Advisers, in relation to the Combination. In providing their advice to the National Express Directors, the National Express Joint Financial Advisers have taken into account the National Express Directors' commercial assessment of the Combination.

Further details of the irrevocable undertakings are set out in Appendix 3 to this Announcement.

5. Background to and reasons for the Stagecoach Board recommendation

The Board of Stagecoach remains conﬁdent in Stagecoach's standalone prospects and potential, and particularly in the positive future for public transport as the UK emerges from the COVID-19 pandemic.

The Board of Stagecoach believes there are significant opportunities for the public transport sector around supporting the UK government's objectives to deliver a sustainable net zero future, as well as healthier, more inclusive and more connected communities.

The Board of Stagecoach has been pleased with Stagecoach's continuing progress in protecting and promoting the health and wellbeing of colleagues and customers, and working in partnership with government to deliver critical public transport, all while protecting Stagecoach's long-term future. The Board of Stagecoach remains grateful for the ongoing efforts of Stagecoach's people in delivering these immediate priorities.

While the Board of Stagecoach considers the standalone prospects for Stagecoach to be good, there are clear and compelling beneﬁts to Stagecoach, its customers and wider stakeholders in a combination with National Express. The rationale for, and beneﬁts of, the Combination are set out in paragraph 3 of this Announcement. The Stagecoach Board further believes that the enhanced platform and scale of the Combined Group will better position Stagecoach to take advantage of the future growth and evolution of the sector and allowing it to capitalise on the recently announced National Bus Strategy.

For these reasons, the Stagecoach Board believes the strategic rationale of the Combination to be particularly compelling. The Combination is expected to result in significant value creation for Stagecoach Shareholders, reﬂecting a combination of the future potential of the Combined Group, the agreed Exchange Ratio and signiﬁcant synergy potential of the proposed transaction.

Furthermore, the Board of Stagecoach believes that the terms of the Combination fairly reﬂect Stagecoach and National Express's respective standalone businesses and their prospects, an appropriate sharing of the expected synergies resulting from the Combination, and the proposed balance of the Board and management team of the Combined Group. The share for share Combination enables Stagecoach Shareholders to participate fully in the potential value creation of the Combination and the Stagecoach Board is pleased that its Chairman and two of its non-executive directors will join the Board of the Combined Group and will be part of Stagecoach's future journey.

6. Information relating to Stagecoach

Stagecoach Group is a leading multi-modal UK public transport company, serving more than 100 communities across England, Scotland and Wales.

Stagecoach Group operates services in regulated and deregulated markets. It is a leading UK bus operator, with major city bus operations in London, Manchester, Liverpool, Newcastle, Hull, Sheffield, Oxford and Cambridge, as well as inter-urban services linking smaller locations and a tram network in Sheffield.

Stagecoach has today separately announced the disposal of its inter-city coach retail businesses to the international transport group ComfortDelGro, including both its stake in its joint venture (with ComfortDelGro) in Scottish Citylink, as well as other UK coach retail businesses, Megabus UK and Falcon.

Stagecoach Group has around 24,000 employees and around 7,900 buses, coaches and trams.

7. Information relating to National Express

National Express Group is a leading transport provider delivering bus, coach and rail services across the UK, Continental Europe, North Africa, North America and the Middle East.

National Express Group holds the largest market share for long haul coach transport in both Spain and the UK, and is the second largest school bus provider in North America. It also operates urban bus and transit services in the USA, Canada, Morocco, Spain and the UK, and rail services in Germany. National Express Group has around 45,000 employees, with more than 939 million passenger journeys made on National Express Group's services.

8. Current trading

Current trading for both National Express and Stagecoach continues in line with statements made in their respective announcements on 14 October 2021 and 8 December 2021.

9. Directors, management, employees, pensions and locations

Strategic plans for the Combined Group

As set out in paragraph 3 (Background to and reasons for the Combination) of this Announcement, the Boards of National Express and Stagecoach believe the Combination is a highly compelling strategic proposition, with significant growth and cost synergies, delivering strong value creation for both sets of shareholders as well as substantial benefits to all stakeholders, including passengers, customers, transportation authorities, employees and pension schemes of the Combined Group.

National Express intends to move quickly to combine National Express and Stagecoach existing businesses and, as soon as practicable following completion of the Combination, the Combined Group will initiate a detailed review of the operations, systems and functions of both businesses to assess how they can work most eﬀectively and eﬃciently together.

This detailed review, which is expected to take up to six months following completion of the Combination, will provide the basis for an integration programme designed to minimise disruption to passengers, customers and employees whilst delivering the expected beneﬁts of the Combination. In particular, it will inform the optimal design of the Combined Group's target operating model (TOM), making the most of the expanded scale, footprint and capabilities the Combined Group will enjoy.

The initial focus of this review will be on potential cost savings through corporate and administration efficiencies, the potential impact of which on duplicative roles in corporate, head office and senior management positions across National Express's and Stagecoach's respective businesses is considered further below. This initial aspect of the review is expected to be completed within three months following completion of the Combination and will then be followed by a period of staff consultation as necessary.

The remaining aspects of the review will also focus on other back office savings, including those arising from IT process alignment, digital savings, combined procurement savings and non-depot property and office footprint rationalisation, which are also considered further below.

During the period of this review, National Express also intends to focus on its plan for the roll-out of measures expected to deliver growth and cost synergies, as further described in paragraph 3 (Background to and reasons for the Combination) of this Announcement. Whilst National Express will seek to undertake as much of this planning work as it can prior to completion of the Combination, it will not be in a position to complete this work until after the CMA has approved the Combination and the Combination has completed. The focus of National Express's planning work post-completion of the Combination is expected to be on network efficiencies and optimisation, operational best practice (including on-board technology systems) and network planning, mileage optimisation, and best-in-class engineering efficiencies.

Composition of the Board and Management of the Combined Group

It is intended that the Board of the Combined Group will comprise a combination of National Express and former Stagecoach directors, approximately in proportion to the expected pro forma ownership of the Combined Group.

Upon completion of the Combination it is intended that Stagecoach's Chairman, Ray O'Toole, will become Chairman of the Board of the Combined Group and that National Express's Deputy Chairman, Jorge Cosmen, will become Deputy Chairman, with Sir John Armitt stepping down as Chairman of National Express and from the Combined Group's Board.

It is intended that National Express's CEO, Ignacio Garat, and National Express's CFO, Chris Davies, will become CEO and CFO respectively of the Combined Group.

It is also intended that Gregor Alexander and Lynne Weedall, currently independent non-executive directors of Stagecoach, will join the Board of the Combined Group and become chairs of the Combined Group's Audit Committee and Remuneration Committee respectively.

It is further intended that Tom Stables, CEO of National Express UK and Germany, will become CEO of UK and Germany for the Combined Group. Carla Stockton-Jones, UK Managing Director of Stagecoach, will become the Managing Director of UK Bus for the Combined Group.

It is also intended that, following completion of the Combination and a short handover period under their existing terms of employment, Martin Griffiths and Ross Paterson will leave their respective roles as Chief Executive and Finance Director of Stagecoach, having received (subject to appropriate settlement agreements being entered into with each executive) a payment of salary and other contractual benefits in lieu of working their contractual notice periods pursuant to their service contracts. Pursuant to the Cooperation Agreement, National Express has acknowledged that it does not intend to serve notice of termination of the employment of each of the Executive Directors before 31 March 2023.

Employees

The Board of National Express believes that employees of the Combined Group will benefit from the increased opportunities offered by the Combined Group, as a market leader in international transport. These benefits are expected to include increased opportunities for training and development as well as further career path flexibility.

Nevertheless, the synergy work carried out by National Express and Stagecoach to date has confirmed the potential to generate cost savings for the Combined Group through corporate and administration efficiencies, which will likely involve headcount reduction in duplicative roles. National Express has identified approximately 50 such duplicative roles in corporate, head office and senior management positions across its and Stagecoach's respective businesses. It is also expected that any rationalisation of IT infrastructure, as further described below, will result in a small number of associated roles in IT support being made redundant.

Pending the outcome of the detailed review referred to above it is not yet known the likely apportionment of related headcount reductions between National Express's and Stagecoach's businesses respectively. Finalisation of the integration programme, following National Express's detailed review post-completion of the Combination, will be subject to engagement with appropriate stakeholders.

Aside from any headcount reduction resulting from this review, as described above, the Board of National Express does not expect the Combination to result in any job losses (including in frontline operational roles) or depot closures.

Following completion of the Combination, the existing contractual and statutory employment rights of National Express and Stagecoach employees will be fully safeguarded and observed in accordance with applicable law.

Save as set out herein, National Express does not expect to make any material changes to the balance of skills and functions of employees or management of Stagecoach.

Pensions

Stagecoach participates in the Stagecoach Group Pension Scheme (the "SGPS"), a defined benefit pension scheme in the UK. The SGPS currently has two sections - the Main Section, which closed to new entrants from 31 March 2009 and to future accrual on 30 April 2017, and the London Section, which is open to future accrual but closed to new entrants on 31 March 2010.

However, as part of the broader management of its pension arrangements, Stagecoach Group has recently allowed a small number of employees to accrue benefits in the Main Section of the SGPS. This Section was re-opened to future accrual in March 2021 for 15 employees, who formerly contributed to one of the Local Government Pension Schemes that Stagecoach Group participated in. Similarly, it is intended that a new Section of the SGPS will be established to provide future service benefits for 8 active members and past service benefits for 15 past employees who currently participate in the Omnibus Section of the Railways Pension Scheme.

Stagecoach Group also participates in other funded and unfunded arrangements which are closed to new members. Together with the SGPS, these schemes produce an overall IAS19 net liability measurement of £185.4 million (net of deferred tax assets) as at 30 October 2021. This includes a small unregistered pension scheme known as the Stagecoach Secured Employer Financed Retirement Benefit Scheme for senior executives.

Stagecoach Group in addition participates in other defined contribution arrangements.

National Express recognises the importance of upholding Stagecoach Group's pension obligations and ensuring that all of Stagecoach Group's pension schemes are appropriately funded in accordance with statutory requirements and their governing documentation. National Express does not intend to make any changes to the benefits provided under these schemes and it is its intention for employer contributions to these schemes to continue in line with current arrangements save as regards the SGPS, as further described below.

National Express has held constructive discussions with the trustees of the SGPS and with the Pensions Regulator and has entered into a legally binding Memorandum of Understanding with the trustees dated 13 December 2021 relating to the future funding and investment strategy of the SGPS. The key terms of the Memorandum of Understanding, to come into effect upon completion of the Combination, include:

· an agreement to amend the funding and investment strategies of the SGPS and carry out a valuation as at 1 October 2021;

· in addition to ongoing contributions for the annual service costs, following completion there will be paid to the scheme committed contributions of £12.5 million per annum, increasing at 3 per cent. per annum compound, for ten years or until the scheme's long term funding objective is met, whichever is earlier;

· a guarantee from National Express of the payments due from employers in the SGPS up to a limit of £230 million; and

· an agreed protocol to provide information to the trustees of the SGPS that is relevant for their assessment of the covenant relevant to the SGPS.

National Express does not intend to admit any other new members to the SGPS.

National Express also intends to continue making contributions to the Stagecoach Secured Employer Financed Retirement Benefit Scheme in accordance with its rules, estimated at approximately £0.5 million per annum. It is expected that the scheme will close to further accrual in September 2023, consistent with Stagecoach's existing plans, and no new entrants will join the scheme before this date.

Management incentivisation arrangements

Except as described below, National Express has not entered into, and has not had any discussions about proposals to enter into, any form of incentivisation arrangements with members of Stagecoach's management team. Following completion of the Combination it is expected that relevant Stagecoach employees will be invited to participate in National Express's existing employee incentive schemes.

National Express has agreed that it will, following the Effective Date, grant to participants in the Stagecoach RSP (subject to their still being employed by Stagecoach Group at the Effective Date) an award in respect of the portion of their outstanding awards under the RSP which lapse on the Effective Date as a result of time pro-rating (the "NE Restricted Share Award").

The value of each individual's NE Restricted Share Award will be equivalent to the value of the Stagecoach Shares subject to the individual's Stagecoach RSP awards which are expected to lapse upon the Scheme becoming Effective due to the application of time pro-rating (after the application of the underpin), based on the Exchange Ratio. The NE Restricted Share Awards will vest on 31 March 2025, subject to a change of control of National Express occurring sooner and subject to forfeiture provisions. The terms of the NE Restricted Share Awards will broadly replicate the terms of awards under the Stagecoach RSP (including replicating the malus and clawback provisions), save that no further underpin will apply, no post-vesting holding period will apply, and awards will only be forfeited if the individual ceases employment with Stagecoach Group due to resignation or dismissal for gross misconduct or, in the case of Martin Griffiths and Ross Paterson, if an appropriate settlement agreement is not entered into, as referred to above in the section "Composition of the Board and Management of the Combined Group" of this paragraph 9.

As noted in paragraph 17 below, participants in Stagecoach Share Schemes will be contacted regarding the effect of the Combination on their rights under these schemes in due course.

Locations, fixed assets, branding and research and development

Upon completion of the Combination, it is expected that the Combined Group will be headquartered at National Express's current head office in Birmingham with its headquarters functions located in both Birmingham and London. It is expected that Stagecoach's existing headquarters functions and related roles will remain in Perth and London and its Stockport-based administrative functions will remain there, in each case, pending the outcome of the detailed post-completion review, referred to above.

As part of this review, National Express intends, following completion of the Combination, to evaluate the locations of business, headquarters functions and fixed assets of National Express and Stagecoach in order to optimise the Combined Group's operations. This will include a consideration of overlapping office and non-depot property locations, duplicate back office costs and IT infrastructure in each of the Combined Group's office locations. The detailed review may result in rationalisation of the Combined Group's office and non-depot property footprint and IT infrastructure currently occupied or operated by National Express and/or Stagecoach. Whilst any rationalisation of office and non-depot property footprint is not expected to result in any further headcount reduction beyond that referred to above in relation to corporate, head office and senior management positions, any rationalisation of IT infrastructure is expected to result in a small number of associated roles in IT support being made redundant.

National Express also intends to continue using the Stagecoach brand.

Stagecoach does not currently have a research and development function and National Express has no plans in this regard.

Trading Facilities

Stagecoach is currently listed on the Official List and, as explained in paragraph 16 (De-listing and re-registration) below, an application will be made to the London Stock Exchange for the cancellation of the trading of the Stagecoach Shares on the Main Market of the London Stock Exchange, and to the FCA to request cancellation of the listing of the Stagecoach Shares on the Official List, in each case with effect from or shortly after the Effective Date. Stagecoach will be re-registered as a private company following the Effective Date.

None of the statements in this paragraph 9 are "post-offer undertakings" for the purposes of Rule 19.5 of the Takeover Code.

10. Offer related arrangements

(a) Confidentiality, Clean Team and Joint Defence Agreements

National Express and Stagecoach have entered into a mutual non-disclosure agreement dated 26 July 2021 pursuant to which each of National Express and Stagecoach has undertaken, among other things, to keep certain information relating to the Combination and the other party confidential and not to disclose it to third parties (other than to permitted parties) unless required by law or regulation.

National Express and Stagecoach have also entered into a clean team confidentiality agreement dated 28 July 2021 which sets out how any confidential information that is competitively sensitive can be disclosed, used or shared.

In addition, National Express and Stagecoach have entered into a joint defence agreement dated 23 August 2021 to ensure that the exchange and/or disclosure of certain materials relating to the parties only takes place between their respective external regulatory counsel and external experts, and does not diminish in any way the confidentiality of such materials and does not result in a waiver of privilege, right or immunity that might otherwise be available.

(b) Cooperation Agreement

National Express and Stagecoach have entered into a cooperation agreement dated 14 December 2021 with respect to conduct of the Combination. Under the terms of the Cooperation Agreement, which also contains provisions in relation to Stagecoach Share Schemes, National Express and Stagecoach have agreed, among other things, that (in summary):

(i) National Express and Stagecoach will co-operate with each other in order to assist in obtaining clearance from competition and other regulatory bodies in order to satisfy the Conditions relating to such clearances;

(ii) National Express and Stagecoach will provide each other with certain information and assistance in the preparation of the Scheme Document, the Circular and the Prospectus;

(iii) National Express will convene the National Express General Meeting so that it is held on the same date as the Court Meeting;

(iv) National Express will be subject to certain customary restrictions on the conduct of its business during the period prior to completion of the Combination, which prohibit, among other things: (a) the payment by National Express of dividends (other than in the ordinary course or by reference to a record date after the Effective Date); (b) the allotment of further shares (or rights or options in respect of shares) (other than in accordance with normal practice pursuant to National Express Share Schemes or in order to settle options or awards vesting under National Express Share Schemes); or (c) amendment to its constitutional documents in any manner that would have an adverse impact on the value of, or rights attaching to, the New National Express Shares; and

(v) National Express and Stagecoach intend to implement the Combination by way of the Scheme, subject to the ability of National Express with the consent of the Panel, to proceed by way of an Offer in the circumstances described in paragraph 20 below.

National Express has entered into a legally binding Memorandum of Understanding with the trustees of the SGPS dated 13 December 2021, to come into effect upon completion of the Combination, relating to the future funding and investment strategy of the SGPS. The key terms of the Memorandum of Understanding include:

(i) an agreement to amend the funding and investment strategies of the SGPS and carry out a valuation as at 1 October 2021;

(ii) in addition to ongoing contributions for the annual service costs, following completion there will be paid to the scheme committed contributions of £12.5 million per annum, increasing at 3 per cent. per annum compound, for ten years or until the scheme's long term funding objective is met, whichever is earlier;

(iii) a guarantee from National Express of the payments due from employers in the SGPS up to a limit of £230 million; and

(iv) an agreed protocol to provide information to the trustees of the SGPS that is relevant for their assessment of the covenant relevant to the SGPS.

11. Irrevocable undertakings and letters of intent

The National Express Directors have irrevocably undertaken to vote in favour of the resolutions to be proposed at the National Express General Meeting in respect of their own beneficial holdings totalling 384,559 National Express Shares, representing in aggregate approximately 0.1 per cent of National Express's issued share capital as at 13 December 2021 (being the last Business Day prior to publication of this Announcement).

The Stagecoach Directors have irrevocably undertaken to vote in favour of the Scheme in respect of their own holdings totalling 80,577,396 Stagecoach Shares, representing in aggregate approximately 14.6 per cent of Stagecoach's issued share capital (excluding treasury shares) as at 13 December 2021 (being the last Business Day prior to publication of this Announcement).

These irrevocable undertakings remain binding if a higher competing offer for Stagecoach is made but cease to be binding on and from the earlier of (i) the Long Stop Date; (ii) National Express announces, with the consent of the Panel, that it does not intend to proceed with the Combination; and (iii) the date on which the Scheme is withdrawn or lapses in accordance with its terms.

Further details of the irrevocable undertakings and the letters of intent are set out in Appendix 3 to this Announcement.

12. Conditions and Scheme of Arrangement

The Combination will be subject to the Conditions and further terms and conditions referred to in Appendix 1 to this Announcement and to be set out in the Scheme Document.

The Conditions include the receipt of prior approval of the Combination from the CMA as described in Part A of Appendix 1 to this Announcement. It cannot be ruled out at this stage that the Combined Group may be required to take remedial action to obtain the CMA's prior approval of the Combination, including the divestiture of businesses, assets or property belonging to the Combined Group.

It is intended that the Combination will be effected by a court sanctioned scheme of arrangement of Stagecoach under Part 26 of the Companies Act 2006.

Under the Scheme, the Scheme Shares held by Scheme Shareholders will be transferred to National Express in consideration for which Scheme Shareholders will receive the Combination Consideration on the basis set out in paragraph 2 of this Announcement.

To become effective, the Scheme requires the approval of Scheme Shareholders by the passing of resolutions at the Court Meeting. The resolutions must be approved by a majority in number of the Scheme Shareholders present and voting (and entitled to vote), either in person or by proxy, representing not less than 75 per cent. in value of the Scheme Shares voted by such Scheme Shareholders. In addition, a special resolution must be passed at the Stagecoach General Meeting to deal with certain ancillary matters, which requires the approval of Stagecoach Shareholders representing at least 75 per cent. of the votes cast at the Stagecoach General Meeting (either in person or by proxy). The Stagecoach General Meeting will be held immediately after the Court Meeting.

Following the Stagecoach Meetings, the Scheme must be sanctioned by the Court. The Scheme will only become effective once a copy of the Scheme Court Order is delivered to the Registrar of Companies.

Upon the Scheme becoming effective, it will be binding on all Stagecoach Shareholders, irrespective of whether or not they attended or voted at the Stagecoach Meetings and the Combination Consideration will be despatched by National Express to Scheme Shareholders no later than 14 days after the Effective Date.

The Scheme will be governed by Scots law and will be subject to the jurisdiction of the Court. The Scheme will be subject to the applicable requirements of the Takeover Code, the Panel, the London Stock Exchange and the FCA.

13. Indicative timing

The timing of implementation of the Combination will be dependent upon a number of factors including receipt of prior approval of the Combination from the CMA and availability of the Court. However, subject to these factors, it is expected that the publication of the Prospectus and the posting of the Scheme Document and the Circular will occur in late 2022 and that the Scheme will become effective around the end of 2022.

14. National Express Shareholder approval and Prospectus

As a result of the size of the acquisition, the Combination constitutes a Class 1 transaction for National Express for the purposes of the Listing Rules. Accordingly, National Express will be required to seek the approval of National Express Shareholders for the Combination at the National Express General Meeting.

National Express will prepare and send to National Express Shareholders the Circular summarising the background to and reasons for the Combination which will include a notice convening the National Express General Meeting. The Combination is conditional on, among other things, the National Express Resolutions being passed by the requisite majority of National Express Shareholders at the National Express General Meeting (but not, for the avoidance of doubt, any other resolutions to be proposed at the National Express General Meeting which shall not be conditions to the Combination).

It is expected that the Circular will be posted to National Express Shareholders at the same time as the Scheme Document is posted to Stagecoach Shareholders, expected to be in late 2022.

15. Admission of New National Express Shares

As noted above, applications will be made to the FCA and the London Stock Exchange for the New National Express Shares to be admitted to the Official List and to trading on the London Stock Exchange's Main Market respectively. It is expected that Admission will become effective and that dealings for normal settlement in the New National Express Shares will commence on the London Stock Exchange at 8.00 a.m. on the first Business Day following the Effective Date.

16. Delisting and re-registration

It is intended that dealings in Stagecoach Shares shall be suspended shortly prior to the Effective Date, at a time to be set out in the Scheme Document. It is further intended that an application will be made to the London Stock Exchange for the cancellation of the trading of the Stagecoach Shares on the Main Market of the London Stock Exchange, and to the FCA to request cancellation of the listing of the Stagecoach Shares on the Official List, in each case with effect from or shortly after the Effective Date. Stagecoach will be re-registered as a private company following the Effective Date.

Share certificates in respect of the Stagecoach Shares will cease to be valid and should be destroyed on the first Business Day following the Effective Date.

In addition, entitlements held within the CREST system to the Stagecoach Shares will be cancelled on the first Business Day following the Effective Date.

17. Share Schemes

Participants in the Stagecoach Share Schemes will be contacted regarding the effect of the Combination on their rights under these schemes in due course.

18. Disclosure of Interests

As at the close of business on 13 December 2021, being the last Business Day prior to the publication of this Announcement, save for the irrevocable undertakings referred to in paragraphs 4 and 11 above, neither National Express, nor any of the National Express Directors, nor, so far as National Express is aware, any person acting in concert (within the meaning of the Takeover Code) with National Express has:

(a) any interest in, or right to subscribe for, any Stagecoach Shares nor does any such person have any short position in Stagecoach Shares, including any short position under a derivative, any agreement to sell, any delivery obligation or right to require another person to purchase or take delivery of Stagecoach Shares; or

(b) borrowed or lent any Stagecoach Shares or entered into any financial collateral arrangements relating to Stagecoach Shares.

19. Documents available for inspection

Copies of the following documents will, by no later than 12 noon (London time) on the Business Day following this Announcement, be published on National Express's website at https://www.nationalexpressgroup.com/investors/possible-combination/ and on Stagecoach's website at http://www.stagecoachgroup.com/investors.aspx:

(a) this Announcement;

(b) the irrevocable undertakings and letters of intent listed in Appendix 3 to this Announcement;

(d) the Joint Defence Agreement;

(e) the Clean Team Agreement;

(f) the Cooperation Agreement; and

(g) consent letters from each of PricewaterhouseCoopers LLP, BofA Securities, HSBC, Deutsche Bank and RBC.

20. General

National Express reserves the right to elect to implement the Combination by way of an Offer for the entire issued and to be issued share capital of Stagecoach not already held by National Express as an alternative to the Scheme in the following circumstances: (i) if Stagecoach consents; (ii) if a third party announces a firm intention to make an offer for the entire issued share capital of Stagecoach which is recommended in whole or in part by the Stagecoach Directors; (iii) if Stagecoach announces its intention to proceed with a competing proposal (as defined in the Cooperation Agreement); or (iv) if the Stagecoach Directors withdraw or modify their unanimous and unconditional recommendation of the Combination to the Stagecoach Shareholders, in accordance with the Cooperation Agreement and subject in each case to the Panel's consent. In such an event an Offer will be implemented on the same terms (subject to appropriate amendments), so far as applicable, as those which would apply to the Scheme and subject to the amendments referred to in Part C of Appendix 1 to this Announcement.

If the Combination is effected by way of an Offer and such Offer becomes or is declared unconditional in all respects and sufficient acceptances are received, National Express intends to: (i) request the London Stock Exchange and the FCA cancel trading in Stagecoach Shares on the London Stock Exchange's Main Market and the listing of the Stagecoach Shares from the Official List; and (ii) exercise its rights to apply the provisions of Chapter 3 of Part 28 of the Companies Act 2006 to acquire compulsorily the remaining Stagecoach Shares in respect of which the Offer has not been accepted.

Further Information

This Announcement does not constitute a prospectus or prospectus equivalent document.

Information Relating to Stagecoach Shareholders

Overseas Jurisdictions

Unless otherwise determined by National Express or required by the Takeover Code, and permitted by applicable law and regulation, the availability of New National Express Shares to be issued pursuant to the Combination to Stagecoach Shareholders will not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in favour of the Combination by any such use, means, instrumentality or form within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Accordingly, copies of this Announcement and any formal documentation relating to the Combination are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from any Restricted Jurisdiction or any other jurisdiction where to do so would constitute a violation of the laws of that jurisdiction, and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send such documents in or into or from any Restricted Jurisdiction. Doing so may render invalid any related purported vote in respect of the Combination. If the Combination is implemented by way of an Offer (unless otherwise permitted by applicable law and regulation), the Offer may not be made directly or indirectly, in or into, or by the use of mails or any means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of any Restricted Jurisdiction and the Offer may not be capable of acceptance by any such use, means, instrumentality or facilities or from within any Restricted Jurisdiction.

Further details in relation to Stagecoach Shareholders in overseas jurisdictions will be contained in the Scheme Document.

The Combination will be subject to the applicable requirements of the Takeover Code, the Panel, the London Stock Exchange and the FCA.

Additional Information for US Investors

Important Notices Relating to the Financial Advisers

Deutsche Bank is a joint stock corporation incorporated with limited liability in the Federal Republic of Germany, with its head office in Frankfurt am Main where it is registered in the Commercial Register of the District Court under number HRB 30 000. Deutsche Bank is authorised under German banking law. The London branch of Deutsche Bank AG is registered in the register of companies for England and Wales (registration number BR000005) with its registered address and principal place of business at Winchester House, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank is authorised and regulated by the European Central Bank and the German Federal Financial Supervisory Authority (BaFin). With respect to activities undertaken in the UK, Deutsche Bank is authorised by the PRA with deemed variation of permission. It is subject to regulation by the FCA and limited regulation by the PRA. Details about the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the FCA's website. Deutsche Bank is acting exclusively as financial adviser to Stagecoach and no one else in connection with the matters described in this Announcement and will not be responsible to anyone other than Stagecoach for providing the protections afforded to clients of Deutsche Bank nor for providing advice in connection with the subject matter of this Announcement or any other matter referred to in this Announcement.

Cautionary Note Regarding Forward Looking Statements

No Profit Forecasts or Estimates

Quantified Financial Benefits Statement

Dealing and Opening Position Disclosure Requirements

Publication on website and availability of hard copies

A copy of this Announcement is and will be available, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, for inspection on National Express's website https://www.nationalexpressgroup.com/investors/possible-combination/ and on Stagecoach's website at http://www.stagecoachgroup.com/investors.aspx by no later than 12 noon (London time) on the Business Day following this Announcement. For the avoidance of doubt, the contents of the websites referred to in this Announcement are not incorporated into and do not form part of this Announcement.

National Express Shareholders may request a hard copy of this Announcement by contacting National Express's registrars, Equiniti Limited, between 8.30 a.m. and 5.30 p.m. Monday to Friday (except public holidays in England and Wales) on 0371 384 2152 from within the UK or +44 (0)121 415 7047 if calling outside the UK or by submitting a request in writing to Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, United Kingdom. International rates apply to calls from outside the UK. Calls may be recorded and Equiniti Limited cannot provide advice on the merits of the Combination or give any financial, legal or tax advice. For persons who receive a copy of this Announcement in electronic form or via a website notification, a hard copy of this Announcement will not be sent unless so requested.

If you are in any doubt about the contents of this Announcement or the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank manager, solicitor, accountant or independent financial adviser duly authorised under the Financial Services and Markets Act 2000 (as amended) if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

Rounding

appendix 1

CONDITIONS TO AND CERTAIN FURTHER TERMS OF THE COMBINATION

Part A: Conditions of the Combination

1. The Combination will be conditional upon the Scheme becoming unconditional and becoming effective, subject to the provisions of the Takeover Code, by no later than the Long Stop Date, or such later date (if any) as National Express and Stagecoach may agree, with the consent of the Panel, and the Court may allow.

2. Scheme approval

The Scheme will be conditional upon:

(a)

(i) its approval by a majority in number representing not less than 75 per cent. in value of the Scheme Shareholders (or the relevant class or classes thereof, if applicable) present and voting, either in person or by proxy, at the Court Meeting and at any separate class meeting which may be required by the Court or at any adjournment of any such meeting; and

(ii) the Court Meeting and any separate class meeting which may be required by the Court or any adjournment of any such meeting being held on or before the 22nd day after the expected date of the Court Meeting to be set out in the Scheme Document in due course (or such later date, if any, as National Express and Stagecoach may agree and the Court may allow);

(b)

(i) all resolutions necessary to approve and implement the Scheme being duly passed by the requisite majority or majorities at the Stagecoach General Meeting or at any adjournment of that meeting; and

(ii) the Stagecoach General Meeting or any adjournment of that meeting being held on or before the 22nd day after the expected date of the Stagecoach General Meeting to be set out in the Scheme Document in due course (or such later date, if any, as National Express and Stagecoach may agree and the Court may allow);

(c)

(i) the sanction of the Scheme with or without modification (but subject to any such modification being acceptable to National Express and Stagecoach) and the delivery of a copy of the Scheme Court Order to the Registrar of Companies; and

(ii) the Scheme Court Hearing being held on or before the 22nd day after the expected date of the Scheme Court Hearing to be set out in the Scheme Document in due course (or such later date, if any, as National Express and Stagecoach may agree and the Court may allow).

3. In addition, National Express and Stagecoach have agreed that the Combination will be conditional upon the following conditions and, accordingly, the necessary actions to make the Scheme effective will not be taken unless the following Conditions (as amended if appropriate) have been satisfied or, where relevant, waived:

(a) National Express Shareholder approval

The passing at the National Express General Meeting (or at any adjournment thereof) of such resolutions as are necessary to approve, implement and effect the Combination and the acquisition of any Stagecoach Shares including resolutions to authorise the allotment of New National Express Shares pursuant to the Combination and approve the Combination in accordance with Class 1 requirements under Listing Rule 10.5.1R(2) (such resolutions shall be set out in the Circular in due course);

(b) Admission to listing

The FCA having acknowledged to National Express or its agent (and such acknowledgement not having been withdrawn) that the application for the admission of the New National Express Shares to the premium listing segment of the Official List has been approved and (after satisfaction of any conditions to which such approval is expressed to be subject ("listing conditions")) will become effective as soon as a dealing notice has been issued by the FCA and any listing conditions of the London Stock Exchange having been satisfied;

The London Stock Exchange having acknowledged to National Express or its agent (and such acknowledgement not having been withdrawn) that the New National Express Shares will be admitted to trading on the London Stock Exchange's Main Market;

(d) CMA Phase 1 clearance

(i) the CMA confirming in terms satisfactory to National Express (acting reasonably) that the Combination is not a qualifying merger for the purposes of the Enterprise Act 2002; or

(ii) the CMA confirming in terms satisfactory to National Express (acting reasonably) that it will not refer the whole or any part of the Combination for a Phase 2 Investigation; or

(iii) the Combination being deemed to have been cleared by operation of section 33(3)(za) of the Enterprise Act 2002;

(e) CMA Phase 2 clearance

In the event that the CMA refers the Combination or any part of it or any matter arising from it for a Phase 2 Investigation and condition ‎3(d)(ii) is not (with the consent of the Panel) invoked by National Express, the CMA deciding, either unconditionally or subject to terms satisfactory to National Express (acting reasonably), that it will not order that the Combination or any part of it or any matter arising from it be prohibited;

(f) General Third Party clearances

(i) No government or governmental, quasi-governmental, supranational, statutory, regulatory, environmental or investigative body, court, trade agency, association, institution or any other body or person whatsoever in any jurisdiction (each a "Third Party") having decided to take, institute, implement or threaten any action, proceeding, suit, investigation, enquiry or reference, or enacted, made or proposed any statute, regulation, decision or order, or having taken any other steps which would or might reasonably be expected to:

(A) require, prevent or delay the divestiture, or materially alter the terms envisaged for any proposed divestiture by any member of the Wider National Express Group or any member of the Wider Stagecoach Group of all or any portion of their respective businesses, assets or property or impose any limitation on the ability of any of them to conduct their respective businesses (or any of them) or to own any of their respective assets or properties or any part thereof which, in any such case, is material in the context of the Wider National Express Group or the Wider Stagecoach Group, in either case taken as a whole;

(B) require, prevent or delay the divestiture by any member of the Wider National Express Group of any shares, securities or other interests in any member of the Wider Stagecoach Group;

(C) impose any material limitation on, or result in a delay in, the ability of any member of the Wider National Express Group directly or indirectly to acquire or to hold or to exercise effectively, directly or indirectly, any rights of ownership in respect of shares or loans or securities convertible into shares or any other securities (or the equivalent) in any member of the Wider Stagecoach Group or the Wider National Express Group or to exercise management control over any such member;

(D) otherwise adversely affect the business, assets, profits or prospects of any member of the Wider National Express Group or of any member of the Wider Stagecoach Group to an extent which is material in the context of the Wider National Express Group or the Wider Stagecoach Group, in either case taken as a whole;

(E) make the Combination or its implementation or the acquisition or proposed acquisition by National Express or any member of the Wider National Express Group of any shares or other securities in, or control of Stagecoach void, illegal, and/or unenforceable under the laws of any jurisdiction, or otherwise, directly or indirectly, restrain, restrict, prohibit, delay or otherwise interfere with the same, or impose additional conditions or obligations with respect thereto, or otherwise challenge or interfere therewith;

(F) except pursuant to Chapter 3 of Part 28 of the Companies Act, require any member of the Wider National Express Group or the Wider Stagecoach Group to offer to acquire any shares or other securities (or the equivalent) or interest in any member of the Wider Stagecoach Group or the Wider National Express Group owned by any third party;

(G) impose any limitation on, or result in any delay of, the ability of any member of the Wider Stagecoach Group or the Wider National Express Group to integrate or co-ordinate its business, or any part of it, with the businesses of any other member of the Wider Stagecoach Group or the Wider National Express Group which is adverse to and material in the context of the Wider Stagecoach Group or the Wider National Express Group, in each case taken as a whole or in the context of the Combination; or

(H) result in any member of the Wider Stagecoach Group or the Wider National Express Group ceasing to be able to carry on business under any name under which it presently does so,

and all applicable waiting and other time periods during which any such Third Party could institute, implement or threaten any action, proceeding, suit, investigation, enquiry or reference or any other step under the laws of any jurisdiction in respect of the Combination or the acquisition or proposed acquisition of any Stagecoach Shares having expired, lapsed or been terminated;

(ii) All necessary filings or applications having been made in connection with the Combination and all statutory or regulatory obligations in any jurisdiction having been complied with in connection with the Combination or the acquisition by any member of the Wider National Express Group of any shares or other securities in, or control of, Stagecoach and all authorisations, orders, recognitions, grants, consents, licences, confirmations, clearances, permissions and approvals reasonably deemed necessary or appropriate by National Express or any member of the Wider National Express Group for or in respect of the Combination or the proposed acquisition of any shares or other securities in, or control of, Stagecoach by any member of the Wider National Express Group having been obtained in terms and in a form reasonably satisfactory to National Express (acting reasonably) from all appropriate Third Parties or persons with whom any member of the Wider Stagecoach Group has entered into contractual arrangements and all such authorisations, orders, recognitions, grants, consents, licences, confirmations, clearances, permissions and approvals together with all material authorisations orders, recognitions, grants, licences, confirmations, clearances, permissions and approvals necessary or appropriate to carry on the business of any member of the Wider Stagecoach Group which is material in the context of National Express Group or Stagecoach Group as a whole remaining in full force and effect and all filings necessary for such purpose have been made and there being no notice or intimation of any intention to revoke or not to renew any of the same at the time at which the Combination becomes otherwise unconditional and all necessary statutory or regulatory obligations in any jurisdiction having been complied with;

(g) Certain matters arising as a result of any arrangement, agreement etc.

Save as Disclosed, there being no provision of any agreement, arrangement, licence, permit or other instrument to which any member of the Wider Stagecoach Group is a party or by or to which any such member or any of its assets may be bound, entitled or subject, which in consequence of the Combination or the proposed acquisition of any shares or other securities in Stagecoach or because of a change in the control or management of Stagecoach or otherwise, could or might result in (in each case to an extent which is material and adverse in the context of the Wider Stagecoach Group as a whole, or in the context of the Combination):

(i) any moneys borrowed by or any other indebtedness (actual or contingent) of, or grant available to any such member, being or becoming repayable or capable of being declared repayable immediately or earlier than their or its stated maturity date or repayment date or the ability of any such member to borrow moneys or incur any indebtedness being withdrawn or inhibited or being capable of becoming or being withdrawn or inhibited;

(ii) any such agreement, arrangement, licence, permit or instrument or the rights, liabilities, obligations or interests of any such member thereunder being terminated or adversely modified or adversely affected or any obligation or liability arising or any adverse action being taken or arising thereunder;

(iii) any assets or interests of any such member being or falling to be disposed of or charged or any right arising under which any such asset or interest could be required to be disposed of or charged;

(iv) the creation or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property or assets of any such member;

(v) the rights, liabilities, obligations or interests of any such member in, or the business of any such member with, any person, firm or body (or any arrangement or arrangements relating to any such interest or business) being terminated, adversely modified or adversely affected;

(vi) the value of any such member or its financial or trading position or prospects being prejudiced or adversely affected;

(vii) any such member ceasing to be able to carry on business under any name under which it presently does so; or

(viii) the creation of any liability, actual or contingent, by any such member,

and no event having occurred which, under any provision of any agreement, arrangement, licence, permit or other instrument to which any member of the Wider Stagecoach Group is a party or by or to which any such member or any of its assets may be bound, entitled or subject, could result in any of the events or circumstances as are referred to in sub-paragraphs (i) to (viii) of this Condition (in each case to the extent which is material in the context of the Wider Stagecoach Group taken as a whole);

(h) Certain events occurring since 1 May 2021

Save as Disclosed, no member of the Wider Stagecoach Group having, since 1 May 2021:

(i) save as between Stagecoach and wholly owned subsidiaries of Stagecoach or for Stagecoach Shares issued pursuant to the vesting of awards granted under Stagecoach Share Schemes, issued, authorised or proposed the issue of additional shares of any class;

(ii) save as between Stagecoach and wholly owned subsidiaries of Stagecoach, or for the grant of awards under Stagecoach Share Schemes, issued or agreed to issue, authorised or proposed the issue of securities convertible into shares of any class or rights, warrants or options to subscribe for, or acquire, any such shares or convertible securities;

(iii) other than to another member of Stagecoach Group, recommended, declared, paid or made or proposed to recommend, declare, pay or make any bonus, dividend or other distribution whether payable in cash or otherwise;

(iv) save for intra-Stagecoach Group transactions, merged or demerged with any body corporate or acquired or disposed of or transferred, mortgaged or charged or created any security interest over any assets or any right, title or interest in any asset (including shares and trade investments) or authorised or proposed or announced any intention to propose any merger, demerger, acquisition or disposal, transfer, mortgage, charge or security interest, in each case, (i) other than in the ordinary course of business and (ii) which is material in the context of the Wider Stagecoach Group taken as a whole;

(v) save for intra-Stagecoach Group transactions, made or authorised or proposed or announced an intention to propose any change in its loan capital in each case, to the extent which is material in the context of the Wider Stagecoach Group taken as a whole;

(vi) issued, authorised or proposed the issue of any debentures or (save for intra-Stagecoach Group transactions), save in the ordinary course of business, incurred or increased any indebtedness or become subject to any guarantee or contingent liability;

(vii) purchased, redeemed or repaid or announced any proposal to purchase, redeem or repay any of its own shares or other securities or reduced or, save in respect to the matters mentioned in sub-paragraph (i) above, made any other change to any part of its share capital, in each case, to the extent which is material in the context of the Wider Stagecoach Group taken as a whole;

(viii) other than pursuant to the Combination (and except for transactions between Stagecoach and its wholly owned subsidiaries or between wholly owned subsidiaries of Stagecoach which are not material in the context of the Wider Stagecoach Group) implemented, or authorised, proposed or announced its intention to implement, any reconstruction, amalgamation, scheme, commitment or other transaction or arrangement;

(ix) entered into or changed the terms of any contract with any director or senior executive;

(x) entered into or varied or authorised, proposed or announced its intention to enter into or vary any contract, transaction or commitment (whether in respect of capital expenditure or otherwise) which is of a long term, onerous or unusual nature or magnitude or which is or could be restrictive on the businesses of any member of the Wider Stagecoach Group or the Wider National Express Group or which involves or could involve an obligation of such a nature or magnitude other than in the ordinary course of business and which is material or would reasonably likely to be material in the context of the Wider Stagecoach Group taken as a whole;

(xi) (other than in respect of a member which is dormant and was solvent at the relevant time) taken any corporate action or had any legal proceedings started or threatened against it for its winding up, dissolution or reorganisation or for the appointment of a receiver, administrative receiver, administrator, trustee or similar officer of all or any of its assets or revenues or any analogous proceedings in any jurisdiction or had any such person appointed, and in each such case, to the extent which is material in the context of the Wider Stagecoach Group taken as a whole;

(xii) entered into any contract, transaction or arrangement which would be restrictive on the business of any member of the Wider Stagecoach Group other than to a nature and extent which is normal in the context of the business concerned, and in each such case which is material or would reasonably likely to be material in the context of the Wider Stagecoach Group taken as a whole;

(xiii) waived or compromised any claim otherwise than in the ordinary course of business and in any case which is material or would reasonably likely to be material in the context of the Wider Stagecoach Group taken as a whole;

(xiv) entered into any contract, commitment, arrangement or agreement or passed any resolution or made any offer (which remains open for acceptance) with respect to or announced any intention to, or to propose to, effect any of the transactions, matters or events referred to in this Condition;

(xv) having made or agreed or consented to any change to:

(A) the terms of the trust deeds constituting the pension scheme(s) established by any member of the Wider Stagecoach Group for its directors, employees or their dependents;

(B) the contributions payable to any such scheme(s) or to the benefits which accrue or to the pensions which are payable thereunder;

(C) the basis on which qualification for, or accrual or entitlement to, such benefits or pensions are calculated or determined; or

(D) the basis upon which the liabilities (including pensions) of such pension schemes are funded, valued or made,

in each case, to the extent which is material in the context of the Wider Stagecoach Group taken as a whole;

(xvi) proposed, agreed to provide or modified the terms of Stagecoach Share Schemes or any share option scheme, incentive scheme or other benefit constituting a material change relating to the employment or termination of employment of a material category of persons employed by the Wider Stagecoach Group or which constitutes a material change to the terms or conditions of employment of any senior employee of the Wider Stagecoach Group, save as agreed by the Panel or by National Express; or

(xvii) having taken (or agreed or proposed to take) any action which requires, or would require, the consent of the Panel or the approval of Stagecoach Shareholders in general meeting in accordance with, or as contemplated by, Rule 21.1 of the Takeover Code.

(i) No adverse change, litigation or regulatory enquiry

Save as Disclosed, since, in the case of Stagecoach, 1 May 2021 or in the case of National Express, 31 December 2020:

(i) no adverse change or deterioration having occurred in the business, assets, financial or trading position or profits or prospects of any member of the Wider Stagecoach Group or the Wider National Express Group which, in any such case, is material in the context of the Wider Stagecoach Group or the Wider National Express Group taken as a whole and no circumstances have arisen which would or might reasonably be expected to result in any such adverse change;

(ii) (other than as a result of or in connection with the Combination), no litigation, arbitration proceedings, prosecution or other legal proceedings to which any member of the Wider Stagecoach Group or the Wider National Express Group is or may become a party (whether as a plaintiff, defendant or otherwise) and no investigation by any Third Party against or in respect of any member of the Wider Stagecoach Group or the Wider National Express Group having been instituted announced or threatened by or against or remaining outstanding in respect of any member of the Wider Stagecoach Group or the Wider National Express Group which in any such case, has had or might reasonably be expected to have an adverse effect that is material in the context of the Wider Stagecoach Group or the Wider National Express Group; and

(iii) no contingent or other liability having arisen or become apparent to National Express or Stagecoach (other than in the ordinary course of business) which will or might be likely to adversely affect the business, assets, financial or trading position or profits or prospects or operational performance of any member of the Wider Stagecoach Group or the Wider National Express Group to an extent which is material in the context of the Wider Stagecoach Group or the Wider National Express Group taken as a whole;

(j) No withdrawal, cancellation, termination or modification of licence

Save as Disclosed, no steps having been taken which are likely to result in the withdrawal, cancellation, termination or modification of any licence held by any member of the Wider Stagecoach Group which is necessary for the proper carrying on of its business and the withdrawal, cancellation, termination or modification of which is material and has had, or might reasonably be expected to have, a material adverse effect on the Wider Stagecoach Group taken as a whole;

(k) No discovery of certain matters

(i) Save as Disclosed, National Express not having discovered:

(A) that any financial, business or other information concerning the Wider Stagecoach Group as contained in the information publicly disclosed at any time by or on behalf of any member of the Wider Stagecoach Group is materially misleading, contains a material misrepresentation of fact or omits to state a fact necessary to make that information not misleading, in each case, to the extent which is material in the context of the Wider Stagecoach Group taken as a whole;

(B) that any member of the Wider Stagecoach Group is subject to any liability (contingent or otherwise), in each case, to the extent which is material in the context of the Wider Stagecoach Group taken as a whole; or

(C) any information which affects the import of any information disclosed at any time prior to this Announcement by or on behalf of any member of the Wider Stagecoach Group to any member of the Wider National Express Group and which is material in the context of the Wider Stagecoach Group taken as a whole;

(ii) Save as Disclosed, National Express not having discovered:

(A) that any past or present member of the Wider Stagecoach Group has not complied with any applicable legislation or regulations of any jurisdiction with regard to the use, treatment, handling, storage, transport, release, disposal, discharge, spillage, leak or emission of any waste or hazardous substance or any substance likely to impair the environment or harm human health, or otherwise relating to environmental matters or the health and safety of any person, or that there has otherwise been any such use, treatment, handling, storage, transport, release, disposal, discharge, spillage, leak or emission (whether or not this constituted a non‑compliance by any person with any legislation or regulations and wherever the same may have taken place) which, in any case, would be likely to give rise to any liability (whether actual or contingent) or cost on the part of any member of the Wider Stagecoach Group which in any case is material in the context of Stagecoach Group taken as a whole;

(B) that there is, or is likely to be, any liability, whether actual or contingent, to make good, repair, reinstate or clean up any property now or previously owned, occupied or made use of by any past or present member of the Wider Stagecoach Group or any other property or any controlled waters under any environmental legislation, regulation, notice, circular, order or other lawful requirement of any relevant authority or third party or otherwise which in any case is material in the context of Stagecoach Group taken as a whole; or

(C) that circumstances exist whereby a person or class of persons would be likely to have a claim in respect of any product or process of manufacture or materials used therein now or previously manufactured, sold or carried out by any past or present member of the Wider Stagecoach Group which is or would be likely, materially and adversely, to affect any member of the Wider Stagecoach Group and which is material in the context of Stagecoach Group taken as a whole;

(l) Anti-corruption, sanctions and criminal property

Save as Disclosed, National Express not having discovered that:

(i) any past or present member, director, officer or employee of the Wider Stagecoach Group is or has at any time engaged in any activity, practice or conduct which would constitute an offence under the Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977 or any other applicable anti-corruption legislation; or (b) any person that performs or has performed services for or on behalf of the Wider Stagecoach Group is or has at any time engaged in any activity, practice or conduct in connection with the performance of such services which would constitute an offence under the Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977 or any other applicable anti-corruption legislation; or

(ii) any material asset of any member of the Wider Stagecoach Group constitutes criminal property as defined by section 340(3) of the Proceeds of Crime Act 2002 (but disregarding paragraph (b) of that definition) or under any other applicable law, rule, or regulation concerning money laundering or proceeds of crime or any member of Stagecoach Group is found to have engaged in activities constituting money laundering under any applicable law, rule, or regulation concerning money laundering; or

(iii) any past or present member, director, officer or employee of Stagecoach Group has engaged in any business with, made any investments in, made any funds or assets available to or received any funds or assets from: (a) any government, entity or individual in respect of which US or European Union persons, or persons operating in those territories, are prohibited from engaging in activities or doing business, or from receiving or making available funds or economic resources, by US, UK or European Union laws or regulations, including the economic sanctions administered by the United States Office of Foreign Assets Control, or HM Treasury & Customs; or (b) any government, entity or individual targeted by any of the economic sanctions of the United Nations, the United States, the United Kingdom, the European Union or any of its member states, in each case to an extent which is material in the context of the Wider Stagecoach Group taken as a whole; or

(iv) any past or present member, director, officer or employee of the Wider Stagecoach Group:

(A) has engaged in conduct which would violate any relevant anti-terrorism laws, rules, or regulations, including but not limited to the U.S. Anti-Terrorism Act;

(B) has engaged in conduct which would violate any relevant anti-boycott law, rule, or regulation or any applicable export controls, including but not limited to the Export Administration Regulations administered and enforced by the U.S. Department of Commerce or the International Traffic in Arms Regulations administered and enforced by the U.S. Department of State;

(C) has engaged in conduct which would violate any relevant laws, rules, or regulations concerning human rights, including but not limited to any law, rule, or regulation concerning false imprisonment, torture or other cruel and unusual punishment, or child labour; or

(D) is debarred or otherwise rendered ineligible to bid for or to perform contracts for or with any government, governmental instrumentality, or international organisation or found to have violated any applicable law, rule, or regulation concerning government contracting or public procurement; or

(m) no member of the Wider Stagecoach Group being engaged in any transaction which would cause National Express to be in breach of any law or regulation upon its acquisition of Stagecoach, including the economic sanctions of the United States Office of Foreign Assets Control, or HM Treasury & Customs, or any government, entity or individual targeted by any of the economic sanctions of the United Nations, the United States, the United Kingdom, the European Union or any of its member states.

Part B: Waiver and Invocation of the Conditions

1. Subject to the requirements of the Panel in accordance with the Takeover Code, National Express reserves the right to waive, in whole or in part, all or any of the Conditions above, and to proceed with the Scheme Court Hearing prior to the fulfilment, satisfaction or waiver of any of the Conditions, except for Conditions 1, 2(a)(i), 2(b)(i) and 2(c)(i) and 3(a) to (c) (inclusive), which cannot be waived. If any of Conditions 2(a)(ii), 2(b)(ii) or 2(c)(ii) is not satisfied by the relevant deadline specified in the relevant Condition, National Express shall make an announcement by 8.00 a.m. on the Business Day following such deadline confirming whether it has invoked the relevant Condition, waived the relevant deadlines or agreed with Stagecoach to extend the relevant deadline.

2. Conditions 1, 2(a)(i), 2(b)(i), 2(c)(i) and 3 (a) to (c) (inclusive) must be fulfilled, and Conditions 3 (d) to (m) (inclusive) fulfilled or waived, by no later than 11.59 p.m. on the date immediately preceding the date of the Scheme Court Hearing, failing which the Scheme will lapse.

3. Neither National Express nor Stagecoach shall be under any obligation to waive or treat as satisfied any of the Conditions capable of waiver by a date earlier than the latest date specified above for the fulfilment or waiver thereof, notwithstanding that the other Conditions of the offer may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such Conditions may not be capable of fulfilment.

4. Under Rule 13.5(a) of the Takeover Code, National Express may not invoke a Condition that is subject to Rule 13.5(a) of the Takeover Code so as to cause the Scheme not to proceed, to lapse or to be withdrawn unless the circumstances which give rise to the right to invoke the condition are of material significance to National Express in the context of the offer.

5. National Express may only invoke a Condition that is subject to Rule 13.5(a) of the Takeover Code with the consent of the Panel and any Condition that is subject to Rule 13.5(a) of the Takeover Code may be waived by National Express.

6. Conditions 1, 2(a)(i), 2(b)(i) and 2(c)(i) and 3(a) to (c) (inclusive) and, if applicable, any acceptance condition if the Combination is implemented by means of an Offer, are not subject to Rule 13.5(a) of the Takeover Code.

Part C: Implementation by way of Offer

National Express reserves the right, with the consent of the Panel, to implement the Combination by way of a takeover offer (as defined in Part 28 of the Companies Act 2006), in accordance with the terms of the Cooperation Agreement. In such an event, such Offer will be implemented on the same terms, so far as applicable, as those which would apply to the Scheme, subject to appropriate amendments, including (without limitation and subject to the consent of the Panel) an acceptance condition that is set at 75 per cent. (or such lesser percentage, as National Express and Stagecoach may decide after, to the extent necessary, consultation with the Panel, being in any case more than 50 per cent.) of the Stagecoach Shares (i) in nominal value of the shares to which such Offer relates; and (ii) of the voting rights attached to those shares, and that is subject to National Express and/or (with the consent of the Panel) any of its wholly owned subsidiaries having acquired or agreed to acquire, whether pursuant to the Offer or otherwise, Stagecoach Shares carrying more than 50 per cent. of the voting rights normally exercisable at a general meeting of Stagecoach, including, for this purpose, any such voting rights attaching to Stagecoach Shares that are unconditionally allotted or issued before the takeover offer becomes or is declared unconditional as to acceptances, whether pursuant to the exercise of any outstanding subscription or conversion rights or otherwise. The availability of the Combination to persons not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions. Persons who are not resident in the United Kingdom should inform themselves about and observe any applicable requirements.

Part D: Certain further terms of the Combination

1. The Scheme will be governed by Scots law and be subject to the jurisdiction of the Court and to the conditions and further terms set out in this Announcement and in the Scheme Document. The Combination will comply with the applicable rules and regulations of the FCA and the London Stock Exchange and the Takeover Code. This Announcement does not constitute, or form part of, an offer or invitation to purchase Stagecoach Shares or any other securities.

2. Each of the Conditions shall be regarded as a separate Condition and shall not be limited by reference to any other Condition.

3. If National Express is required by the Panel to make an offer for Stagecoach Shares under the provisions of Rule 9 of the Takeover Code, National Express may make such alterations to any of the above Conditions as are necessary to comply with the provisions of that Rule.

4. Fractions of New National Express Shares will not be allotted or issued to persons accepting the Scheme. Fractional entitlements to New National Express Shares will be aggregated and sold in the market and the net proceeds of sale distributed pro rata to persons entitled thereto. However, individual entitlements to amounts of less than £3 will not be paid to persons accepting the Scheme but will be retained for the benefit of National Express.

5. The offer will not be made, directly or indirectly, in or into, or by use of the mails of, or by any means or instrumentality (including, without limitation, facsimile transmission, telephone, internet or e-mail) of interstate or foreign commerce of, or of any facility of a national securities exchange of, any Restricted Jurisdiction and the Combination will not be capable of acceptance by any such use, means, instrumentality or facility or from within any Restricted Jurisdiction.

6. The New National Express Shares to be issued pursuant to the Combination have not been and will not be registered under the US Securities Act nor under any of the relevant securities laws of any Restricted Jurisdiction. Accordingly, the New National Express Shares may not be offered, sold or delivered, directly or indirectly, into any Restricted Jurisdiction, except pursuant to exemptions from applicable requirements of any such jurisdiction.

7. The New National Express Shares will be issued credited as fully paid and will rank pari passu in all respects with the existing National Express Shares. Applications will be made to the FCA for the New National Express Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the New National Express Shares to be admitted to trading on the Main Market of the London Stock Exchange.

8. Stagecoach Shares which will be acquired under the Combination will be acquired fully paid and free from all liens, equities, charges, encumbrances, options, rights of pre-emption and any other third party rights and interests of any nature and together with all rights now or hereafter attaching or accruing to them, including voting rights and the right to receive and retain in full all dividends and other distributions (if any) declared, made or paid on or after the date of this Announcement.

appendix 2

SOURCES OF INFORMATION AND BASES OF CALCULATION

In this Announcement, unless otherwise stated or the context otherwise requires, the following bases and sources have been used.

1. As at close of business on 13 December 2021 (being the last Business Day prior to the release of this Announcement), National Express had in issue 614,086,377 National Express Shares and Stagecoach has in issue 551,106,227 Stagecoach Shares.

2. References to ownership of the Combined Group have been based on:

· 619,072,301 National Express Shares, representing National Express's fully diluted share capital (assuming for these indicative purposes full dilution from all dilutive instruments of National Express in issue as at the date of this Announcement); and

· 203,962,838 New National Express Shares to be issued to Stagecoach Shareholders pursuant to the terms of the Combination at the Exchange Ratio, calculated on the basis of 566,563,439 Stagecoach Shares, which represents Stagecoach's fully diluted share capital (assuming for these indicative purposes full dilution from all dilutive instruments of Stagecoach in issue as at the date of this Announcement).

3. The premium calculations to the price per Stagecoach Share used in this Announcement have been calculated by reference to the closing middle market price of a National Express Share or a Stagecoach Share (as applicable) sourced from Bloomberg on any particular date.

4. References relating to passenger journey numbers have been based on the pre-COVID figures.

5. The synergy numbers are unaudited. Further information underlying the Quantified Financial Benefits Statement in this Announcement is provided in Appendix 4, including reports from PricewaterhouseCoopers LLP, BofA Securities and HSBC as required under Rule 28 of the Takeover Code.

6. Certain figures included in this Announcement have been subject to rounding adjustments.

appendix 3

DETAILS OF IRREVOCABLE UNDERTAKINGS AND LETTERS OF INTENT

A. Irrevocable undertakings from Stagecoach Directors

The following Stagecoach Directors have given irrevocable undertakings to vote in favour of the Scheme at the Court Meeting and the resolutions relating to the Combination at the Stagecoach General Meeting (or in the event that the Combination is implemented by way of an Offer, to accept or procure acceptance of such Offer) in relation to the following Stagecoach Shares currently held by them as well as any further Stagecoach Shares they may acquire:

Name of Stagecoach Shareholder	Number of Stagecoach Shares	Percentage of Stagecoach issued share capital *
Gregor Alexander	10,000	0.002
Martin Griffiths	3,049	0.001
Raymond O'Toole	18,000	0.003
Ross Paterson	355,967	0.065
Karen Thomson	11,071	0.002
Lynne Weedall	12,000	0.002
Sir Brian Souter**	80,167,309	14.547

* Excluding treasury shares

** The beneficial owner of the shares attributed to Sir Brian Souter is HGT Finance B Limited. HGT Finance B Limited has undertaken, so far as it is able in its capacity as the beneficial owner of such shares, to act in order that the obligations accepted by Sir Brian Souter contained in his irrevocable undertaking may be complied with.

The obligations of the Stagecoach Directors under the irrevocable undertakings shall lapse and cease to have effect to the extent not already undertaken and without prejudice to any liability for antecedent breach if:

(a) the Combination has not completed prior to the Long Stop Date;

(b) National Express announces, with the consent of the Panel, that it does not intend to proceed with the Combination and no new, revised or replacement combination (to which this undertaking applies) is announced in accordance with Rule 2.7 of the Takeover Code at the same time; or

(c) the Offer or Scheme lapses or is withdrawn and no new, revised or replacement combination (to which this undertaking applies) is announced in accordance with Rule 2.7 of the Takeover Code at the same time.

B. Letter of intent from HGT Finance A Limited

Dame Ann Gloag (through HGT Finance A Limited) has given to National Express a non-binding letter of intent to vote in favour of the Scheme or accept an Offer (as necessary) and vote in favour of any resolutions which would assist with the implementation of the Combination in respect of a total of 57,661,967 Stagecoach Shares, representing approximately 10.5 per cent. of Stagecoach's issued ordinary share capital in issue on 13 December 2021 (being the last Business Day prior to the release of this Announcement).

C. Irrevocable undertakings from National Express Directors

The following National Express Directors have given irrevocable undertakings to vote in favour of all of the resolutions to be proposed at the National Express General Meeting which will be convened in connection with the Combination in relation to the following National Express Shares currently held by them as well as any further National Express Shares they may acquire:

Name of National Express Shareholder	Number of National Express Shares	Percentage of National Express issued share capital
Sir John Armitt	19,195	0.003
Chris Davies	253,031	0.041
Jorge Cosmen	47,826	0.008
Ignacio Garat	6,100	0.001
Matthew Crummack	18,844	0.003
Michael McKeon	20,869	0.003
Karen Geary	14,347	0.002
Ana de Pro Gonzalo	4,347	0.001
Carolyn Flowers	0	0.000

The obligations of the National Express Directors under the irrevocable undertakings shall lapse and cease to have effect to the extent not already undertaken and without prejudice to any liability for antecedent breach if:

(a) the Combination has not completed prior to the Long Stop Date;

D. Letter of intent from European Express Enterprises Limited and Northern Express Enterprises Limited

European Express Enterprises Limited has given to National Express a non-binding letter of intent to vote in favour of all of the resolutions to be proposed at the National Express General Meeting in respect of a total of 71,211,891 National Express Shares, representing approximately 11.6 per cent. of National Express's ordinary share capital in issue on 13 December 2021 (being the last Business Day prior to the release of this Announcement).

Northern Express Enterprises Limited has given to National Express a non-binding letter of intent to vote in favour of all of the resolutions to be proposed at the National Express General Meeting in respect of a total of 2,755,624 National Express Shares, representing approximately 0.4 per cent. of National Express's ordinary share capital in issue on 13 December 2021 (being the last Business Day prior to the release of this Announcement).

appendix 4

QUANTIFIED FINANCIAL BENEFITS STATEMENT

Part A

Paragraph 3 of this Announcement (Significant Growth and Cost Synergies) contains statements of estimated synergies arising from the Combination (the "Quantified Financial Benefits Statement").

A copy of the Quantified Financial Benefits Statement is set out below:

"The Board of National Express believes that as a direct result of the Combination, the Combined Group will be able to realise significant synergies, delivering attractive value for both sets of shareholders.

The potential sources of quantified cost synergies include:

(a) approximately 25 per cent. from network efficiencies and optimisation , including enabling National Express Coach to utilise Stagecoach's well-located depot network with enhanced operational flexibility (such as removal of 'double-manning', 'dead mileage' and spare vehicle capacity) as well as for repair and maintenance;

(b) approximately 35 per cent. from shared operational best practice across the combined UK bus network , including:

(ii) combined and enhanced scheduling, network and route planning to improve efficiencies and reduce overall mileage;

(iii) enhancing the technology offering across the Combined Group, including migration to 'best-in-class' apps to provide an optimised customer experience; and

(iv) additional adoption of operational best practices including best-in-class engineering, process improvement and other efficiencies.

(i) rationalisation of duplicate plc costs, back office and IT processes, digital savings and combined procurement; and

(ii) the potential for non-depot property and office footprint rationalisation.

Further information on the bases of belief supporting the Quantified Financial Benefits Statement, including the principal assumptions and sources of information, is set out below.

Bases of Belief and Principal Assumptions

Following initial discussions regarding the Combination, a National Express synergy development team was established to evaluate and assess the potential synergies arising from the Combination (the "Team"). The Team, which comprises senior National Express strategy and finance personnel, has worked with the relevant National Express functional heads and other relevant personnel to identify synergy initiatives, to test them, and, where possible, to quantify the expected financial benefits and the costs associated with realising them. In addition, National Express held discussions with Stagecoach management to refine this analysis as part of its due diligence process.

In preparing the Quantified Financial Benefits Statement, National Express and Stagecoach have shared certain operating and financial information to facilitate the analysis in support of assessing the potential synergies expected to arise from the Combination. As is typical of these exercises, however, confidentiality and regulatory considerations have limited the extent of the sharing of information and data. Where the sharing of information and data has been limited, the Team has made estimates and assumptions to aid its development of individual synergy initiatives. The assessment and quantification of the potential synergies have in turn been informed by National Express management's industry experience and knowledge of its existing business.

The cost bases used as the basis for the Quantified Financial Benefits Statement are a blend of National Express's FY19 (for Coach) and FY21 (for Bus) financial results and Stagecoach's FY20 financial results.

In assessing potential synergies expected to arise from the Combination and the associated costs of realising them, the National Express Directors have made the following assumptions, all of which relate to matters which are outside their influence:

· there will be no significant impact on the underlying operations of either National Express or Stagecoach or their ability to continue to conduct their businesses; and

· there will be no material change to macroeconomic, political or legal conditions in the markets or regions in which the Combined Group operates which will materially impact on the implementation of or costs to achieve the proposed cost savings.

The majority of cost saving synergies are substantially within the influence of the National Express Directors.

In general, the synergy assumptions have in turn been risk adjusted, with the National Express Directors exercising a degree of prudence in the calculation of the estimated synergy benefits described in this announcement above.

Reports

As required by Rule 28.1(a) of the Takeover Code, PricewaterhouseCoopers ("PwC"), as reporting accountants to National Express, and BofA Securities and HSBC, as financial advisors to National Express, have provided the reports required under the Rule. Copies of these reports are included in Parts B and C of this Appendix 4.

Each of BofA Securities, HSBC and PwC has given and not withdrawn its consent to the publication of its report in this announcement in the form and context in which it is included.

Notes

These statements are not intended as a profit forecast and should not be interpreted as such. These statements of estimated synergies relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. As a result, the estimated synergies referred to may not be achieved, or may be achieved later or sooner than estimated, or those achieved could be materially different from those estimated. Neither these statements nor any other statement in this announcement should be construed as a profit forecast or interpreted to mean that National Express's earnings in the first full year following completion of the Combination, or in any subsequent period, will necessarily match or be greater than or be less than those of National Express or Stagecoach for the relevant preceding financial period or any other period.

Due to the scale of the Combined Group and in the light of any remedies which may be required in order to secure regulatory and merger control approvals, there may be additional changes to the Combined Group's operations. As a result, and given the fact that the changes relate to the future, the resulting synergies may be materially greater or less than those estimated.

Part B - Report from PricewaterhouseCoopers LLP

The Directors (the "Directors")

National Express Group PLC

15 Alfred Place

London

WC1E 7EB

Merrill Lynch International ("BofA Securities")

2 King Edward Street

London

EC1A 1HQ

HSBC Bank plc ("HSBC")

8 Canada Square

London

E14 5HQ

(BofA Securities and HSBC together the "Financial Advisers")

14 December 2021

Dear Ladies and Gentleman

Report on Quantified Financial Benefits Statement by National Express Group PLC (the "Company")

We report on the quantified financial benefits statement (the "Statement") by the Directors included in the Rule 2.7 announcement dated 14 December 2021 (the "Announcement") to the effect that:

" The Board of National Express believes that as a direct result of the Combination, the Combined Group will be able to realise significant synergies, delivering attractive value for both sets of shareholders.

The potential sources of quantified cost synergies include:

(b) approximately 35 per cent. from shared operational best practice across the combined UK bus network, including:

(ii) combined and enhanced scheduling, network and route planning to improve efficiencies and reduce overall mileage;

(iii) enhancing the technology offering across the Combined Group, including migration to 'best-in-class' apps to provide an optimised customer experience; and

(iv) additional adoption of operational best practices including best-in-class engineering, process improvement and other efficiencies.

(i) rationalisation of duplicate plc costs, back office and IT processes, digital savings and combined procurement; and

(ii) the potential for non-depot property and office footprint rationalisation.

This report is required by Rule 28.1(a)(i) of the City Code on Takeovers and Mergers (the "TakeoverCode") and is given for the purpose of complying with that requirement and for no other purpose.

Opinion

In our opinion, the Statement has been properly compiled on the basis stated.

The Statement has been made in the context of the disclosures in Part A of Appendix 4 to the Announcement setting out the bases of belief of the Directors (including the principal assumptions and sources of information) supporting the Statement and their analysis and explanation of the underlying constituent elements.

Responsibilities

It is the responsibility of the Directors to prepare the Statement in accordance with the requirements of Rule 28 of the Takeover Code.

It is our responsibility to form our opinion, as required by Rule 28.1(a)(i) of the Takeover Code, as to whether the Statement has been properly compiled on the basis stated and to report that opinion to you.

Save for any responsibility which we may have to those persons to whom this report is expressly addressed or to the shareholders of National Express Group PLC as a result of the inclusion of this report in the Announcement, and for any responsibility arising under Rule 28.1(a)(i) of the Takeover Code to any person as and to the extent therein provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Rule 23.2 of the Takeover Code, consenting to its inclusion in the Announcement.

Basis of preparation of the Statement

The Statement has been prepared on the basis stated in Part A of Appendix 4 to the Announcement.

Basis of opinion

We conducted our work in accordance with the Standards for Investment Reporting issued by the Financial Reporting Council ("FRC") in the United Kingdom. We are independent in accordance with the FRC's Ethical Standard as applied to Investment Circular Reporting Engagements, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We have discussed the Statement, together with the underlying plans (relevant bases of belief/including sources of information and assumptions), with the Directors and with the Financial Advisers. Our work did not involve any independent examination of any of the financial or other information underlying the Statement.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in the United States of America or other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Statement has been properly compiled on the basis stated.

We do not express any opinion as to the achievability of the benefits identified by the Directors in the Statement.

Since the Statement and the assumptions on which it is based relate to the future and may therefore be affected by unforeseen events, we express no opinion as to whether the actual benefits achieved will correspond to those anticipated in the Statement and the differences may be material.

Yours faithfully

PricewaterhouseCoopers LLP

Chartered Accountants

Part C - Report from BofA Securities and HSBC on the Quantified Financial Benefits Statement

The Directors

National Express Group PLC

15 Alfred Place

London

WC1E 7EB

14 December 2021

Dear Sirs,

Firm intention to make an offer for Stagecoach Group PLC by National Express Group PLC ("National Express")

We refer to the Quantified Financial Benefits Statement, the bases of belief thereof and the notes thereto (together, the "Statement") as set out in Part A of Appendix 4 to this Announcement, for which the Board of National Express (the "Directors") are solely responsible under Rule 28 of the City Code on Takeovers and Mergers (the "Takeover Code").

We have discussed the Statement (including the assumptions and sources of information referred to therein), with the Directors and those officers and employees of National Express who developed the underlying plans, as well as with PricewaterhouseCoopers LLP ("PwC"). The Statement is subject to uncertainty as described in this Announcement and our work did not involve an independent examination of any of the financial or other information underlying the Statement.

We have relied upon the accuracy and completeness of all the financial and other information provided to us by, or on behalf of, National Express, or otherwise discussed with or reviewed by us, and we have assumed such accuracy and completeness for the purposes of providing this letter.

We do not express any opinion as to the achievability of the quantified financial benefits identified by the Directors.

We have also reviewed the work carried out by PwC and have discussed with them the opinion set out in Part B of Appendix 4 to this Announcement addressed to yourselves and ourselves on this matter.

This letter is provided to you solely in connection with Rule 28.1(a)(ii) of the Takeover Code and for no other purpose. We accept no responsibility to National Express or its shareholders or any person other than the Directors in respect of the contents of this letter. We are acting as financial advisers to National Express and no one else in connection with the Potential Combination and it was for the purpose of complying with Rule 28.1(a)(ii) of the Takeover Code that National Express requested us to prepare this report on the Statement. No person other than the Directors can rely on the contents of this letter, and to the fullest extent permitted by law, we exclude all liability (whether in contract, tort or otherwise) to any other person, in respect of this letter, its results, or the work undertaken in connection with this letter, or any of the results that can be derived from this letter or any written or oral information provided in connection with this letter, and any such liability is expressly disclaimed except to the extent that such liability cannot be excluded by law.

On the basis of the foregoing, we consider that the Statement, for which you as the Directors are solely responsible, has been prepared with due care and consideration.

Yours faithfully,

Merrill Lynch International ("BofA Securities")

HSBC Bank plc ("HSBC")

appendix 5

DEFINITIONS

"Admission"	admission of the New National Express Shares to the Official List with a Premium Listing and to trading on the Main Market of the London Stock Exchange.
"ALSA"	National Express's ALSA business which operates long distance, regional and urban bus and coach services across Spain, and in Morocco, Portugal, Switzerland and France.
"Announcement"	this announcement made pursuant to Rule 2.7 of the Takeover Code.
"Board"	the board of directors.
"BofA Securities"	Merrill Lynch International.
"Business Day"	a day (other than a Saturday, Sunday, public or bank holiday) on which banks are generally open for business in London and Edinburgh.
"Circular"	the circular to be sent by National Express to National Express Shareholders summarising the background to the reasons for the Combination, which will include a notice convening the National Express General Meeting.
"Clean Team Agreement"	the clean team confidentiality agreement dated 28 July 2021 entered into between Stagecoach and National Express.
"CMA"	the Competition and Markets Authority of the United Kingdom (or any successor body or bodies carrying out the same functions in the United Kingdom from time to time).
"Combination"	the proposed combination by acquisition of the entire issued and to be issued share capital of Stagecoach by National Express, to be effected by the Scheme as described in this document (or by the Offer under certain circumstances described in this document).
"Combination Consideration"	the consideration payable in connection with the Combination, comprising 0.36 New National Express Shares per Stagecoach Share.
"Combined Group"	the enlarged group following completion of the Combination comprising Stagecoach Group and National Express Group.
"Conditions"	the conditions to the implementation of the Combination set out in Appendix 1 to this Announcement and to be set out in the Scheme Document.
"Confidentiality Agreement"	the non-disclosure agreement dated 26 July 2021 entered into between Stagecoach and National Express.
"Cooperation Agreement"	the cooperation agreement dated 14 December 2021 entered into between Stagecoach and National Express.
"Court"	the Court of Session at Edinburgh.
"Court Meeting"	the meeting(s) of the Scheme Shareholders convened by order of the Court pursuant to section 896 of the Companies Act 2006 for the purpose of considering and, if thought fit, approving the Scheme (with or without amendment) and any adjournment, postponement or reconvention thereof.
"CREST"	the relevant system (as defined in the Uncertificated Securities Regulations 2001 (SI 2001/3755) in respect of which Euroclear UK & Ireland Limited is the Operator (as defined in the Regulations).
"Dealing Disclosure"	an announcement pursuant to Rule 8 of the Takeover Code containing details of dealings in relevant securities of a party to an offer.
"Deutsche Bank"	Deutsche Bank AG, London Branch.
"Disclosed"	the information fairly disclosed by, or on behalf of Stagecoach: (i) in the annual report and accounts of Stagecoach Group for the financial year ended 1 May 2021; (ii) in this Announcement; (iii) in any other public announcement made by Stagecoach in accordance with the Market Abuse Regulation, the Listing Rules and the Disclosure Rules and Transparency Rules prior to this Announcement; or (iv) as disclosed in writing prior to the date of this Announcement by or on behalf of Stagecoach to National Express (or its respective officers, employees, agents or advisers in their capacity as such).
"Disclosure and Transparency Rules"	the Disclosure and Transparency Rules of the FCA and contained in the FCA's publication of the same name.
"Effective Date"	the date on which (i) the Scheme becomes effective in accordance with its terms; or (ii) if National Express elects to implement the Combination by way of an Offer, the Offer becomes or is declared unconditional in all respects.
"Exchange Ratio"	the exchange ratio of 0.36 New National Express Shares in exchange for each Stagecoach Share.
"Executive Directors"	Martin Griffiths and Ross Paterson.
"FCA"	the Financial Conduct Authority.
"FSMA"	Financial Services and Markets Act 2000 (as amended).
"HSBC"	HSBC Bank plc.
"Joint Defence Agreement"	the confidentiality and joint defence agreement dated 23 August 2021 entered into between Stagecoach and National Express.
"Listing Rules"	the rules and regulations made by the FCA under Part VI of FSMA and contained in the FCA's publication of the same name (as amended from time to time).
"London Stock Exchange"	London Stock Exchange plc.
"Long Stop Date"	31 March 2023 or such later date as may be agreed in writing by National Express and Stagecoach (with the Panel's consent and as the Court may approve (if such approval(s) are required)).
"Main Market"	the main market for listed securities.
"Market Abuse Regulation"	Regulation (EU) No.596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse, as applicable in the UK by virtue of section 3 of the European Union (Withdrawal) Act 2018, as amended from time to time (including by the Market Abuse (Amendment) (EU Exit) Regulations 2019 (SI 2019/310)).
"Memorandum of Understanding"	the memorandum of understanding dated 13 December 2021 entered into between trustees of the SGPS and National Express.
"National Express"	National Express Group PLC, incorporated in England with registered number 02590560.
"National Express Directors"	the directors of National Express as at the date of this Announcement or, where the context so requires, the directors of National Express from time to time.
"National Express EDBP"	National Express Executive Deferred Bonus Plan.
"National Express General Meeting"	the general meeting of National Express Shareholders to be convened to consider and, if thought fit, approve the National Express Resolutions, including any adjournment thereof.
"National Express Group"	National Express, its Subsidiaries and its subsidiary undertakings from time to time.
"National Express LTIP"	National Express's Long Term Incentive Plan.
"National Express Resolutions"	the shareholder resolutions of National Express to approve, effect and implement the Combination and to grant authority to the National Express Directors to allot the New National Express Shares.
"National Express Shareholders"	holders of National Express Shares.
"National Express Share Schemes"	the National Express EDBP, the National Express LTIP and the National Express WMT LSOS.
"National Express Shares"	the ordinary shares of 5 pence each in the capital of National Express.
"National Express WMT LSOS"	National Express's West Midlands Travel Long Service Option Scheme.
"National Express Joint Financial Advisers"	BofA Securities and HSBC.
"New National Express Shares"	the new National Express Shares to be issued pursuant to the Scheme.
"Offer"	should the Combination be implemented by way of a takeover offer as defined in Chapter 3 of Part 28 of the Companies Act 2006, the recommended offer to be made by or on behalf of National Express to acquire the entire issued and to be issued ordinary share capital of Stagecoach and, where the context admits, any subsequent revision, variation, extension or renewal of such offer.
"Offer Document"	should the Combination be implemented by means of the Offer, the document to be sent to Stagecoach Shareholders which will contain, inter alia, the full terms and conditions of the Offer.
"Offer Period"	the period commencing on 21 September 2021 and ending on the earlier of the date on which the Scheme becomes effective and/or the date on which the Scheme lapses or is withdrawn (or such other date as the Takeover Code may provide or the Panel may decide).
"Official List"	the official list maintained by the FCA.
"Opening Position Disclosure"	an announcement containing details of interests or short positions in, or rights to subscribe for, any relevant securities of a party to the offer if the person concerned has such a position.
"Overseas Shareholders"	Scheme Shareholders who are resident in, ordinarily resident in, or citizens of, jurisdictions outside the United Kingdom.
"Panel"	the UK Panel on Takeovers and Mergers.
"Phase 2 Investigation"	an investigation following a reference pursuant to sections 22, 33, 45 or 62 of the Enterprise Act 2002 (as amended) of the Combination to the chair of the CMA for the constitution of a group under Schedule 4 to the Enterprise and Regulatory Reform Act 2013.
"Possible Offer Announcement"	the announcement released by National Express under Rule 2.4 of the Takeover Code on 21 September 2021 in relation to the Combination.
"PRA"	the Prudential Regulation Authority.
"Prospectus"	the document required to be published by National Express in respect of the admission to the Official List of the New National Express Shares.
"Quantified Financial Benefits Statement"	as defined in Appendix 4 to this Announcement.
"RBC"	RBC Europe Limited (trading as RBC Capital Markets).
"Registrar of Companies"	the Registrar of Companies in Scotland.
"Relevant Arrangements"	has the meaning given in paragraph 8.
"Restricted Jurisdiction"	any jurisdiction where local laws or regulations may result in a significant risk of civil, regulatory or criminal exposure if information concerning the Combination is sent or made available to Stagecoach Shareholders in that jurisdiction.
"Scheme"	the proposed scheme of arrangement of Stagecoach under Part 26 of the Companies Act 2006 to implement the Combination with or subject to any modification, addition or condition approved or imposed by the Court.
"Scheme Court Hearing"	the hearing of the Court to sanction the Scheme under section 899 of the Companies Act 2006.
"Scheme Court Order"	the order of the Court sanctioning the Scheme under section 899 of the Companies Act 2006.
"Scheme Document"	the document to be dispatched to Stagecoach Shareholders including the particulars required by section 897 of the Companies Act 2006.
"Scheme Record Time"	the time and date specified as such in the Scheme Document, or such later time as Stagecoach and National Express may agree.
"Scheme Shareholder"	holders of Scheme Shares.
"Scheme Shares"	1. the Stagecoach Shares in issue at the date of the Scheme Document;
	2. any Stagecoach Shares issued after the date of the Scheme Document and prior to the Voting Record Time; and
	3. any Stagecoach Shares issued at or after the Voting Record Time and prior to the Scheme Record Time in respect of which the original or any subsequent holder thereof is bound by the Scheme, or shall by such time have agreed in writing to be bound by the Scheme.
"SGPS"	the Stagecoach Group Pension Scheme, a defined benefit pension scheme operating in the UK.
"Significant Interest"	in relation to an undertaking, a direct or indirect interest of 20 per cent. or more of (1) the total voting rights conferred by the equity share capital (as defined in section 548 of the Companies Act) of such undertaking or (2) the relevant partnership interest.
"Stagecoach"	Stagecoach Group PLC, incorporated in Scotland with registered number SC100764.
"Stagecoach BAYE"	the Stagecoach Share Incentive Plan.
"Stagecoach Directors"	the directors of Stagecoach as at the date of this Announcement or, where the context so requires, the directors of Stagecoach from time to time.
"Stagecoach EPP"	the Stagecoach 2013 Executive Participation Plan.
"Stagecoach General Meeting"	the general meeting of Stagecoach Shareholders to be convened to consider and if thought fit pass, inter alia, a special resolution in relation to the Scheme and the Combination.
"Stagecoach Group"	Stagecoach, its Subsidiaries and its subsidiary undertakings from time to time.
"Stagecoach LTIP"	the Stagecoach 2013 Long Term Incentive Plan.
"Stagecoach Meetings"	the Court Meeting and the Stagecoach General Meeting.
"Stagecoach RSP"	the Stagecoach Restricted Share Plan.
"Stagecoach Shareholders"	the holders of Stagecoach Shares.
"Stagecoach Share Schemes"	the Stagecoach BAYE, the Stagecoach EPP, the Stagecoach LTIP and the Stagecoach RSP, each as amended from time to time.
"Stagecoach Shares"	the ordinary shares of 125/228th pence each in the capital of Stagecoach.
"Subsidiary"	has the meaning given in section 1159 of the Companies Act 2006.
"subsidiary undertakings"	has the meaning given in section 1162 of the Companies Act 2006.
"Takeover Code"	the City Code on Takeovers and Mergers.
"Third Party"	has the meaning given to it in paragraph 3(f)(i) of Appendix 1.
"UK" or "United Kingdom"	the United Kingdom of Great Britain and Northern Ireland.
"US" or "United States"	the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia.
"US Exchange Act"	the US Securities Exchange Act of 1934, as amended.
"US Securities Act"	the United States Securities Act of 1933, as amended.
"Voting Record Time"	6.00 p.m. on the day two days prior to the Court Meeting or any adjournment thereof (as the case may be).
"Wider National Express Group"	National Express and its Subsidiaries, subsidiary undertakings, associated undertakings and any other body corporate partnership, joint venture or person in which National Express and all such undertakings (aggregating their interests) have a Significant Interest (other than any member of the Wider Stagecoach Group).
"Wider Stagecoach Group"	Stagecoach and its Subsidiaries, subsidiary undertakings, associated undertakings and any other body corporate partnership, joint venture or person in which Stagecoach and all such undertakings (aggregating their interests) have a Significant Interest (other than any member of the Wider National Express Group).

All times referred to are London time unless otherwise stated.

All references to "GBP", "pence", "sterling" or "£" are to the lawful currency of the United Kingdom.

All references to statutory provision or law or to any order or regulation shall be construed as a reference to that provision, law, order or regulation as extended, modified, replaced or re-enacted from time to time and all statutory instruments, regulations and orders from time to time made thereunder or deriving validity therefrom.

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