Statement re Possible Offer

RNS Number : 4307M

National Express Group PLC

21 September 2021

 

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

THIS IS AN ANNOUNCEMENT OF A POSSIBLE OFFER FALLING UNDER RULE 2.4 OF THE UK CITY CODE ON TAKEOVERS AND MERGERS (THE "CODE") AND DOES NOT CONSTITUTE AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CODE. THERE CAN BE NO CERTAINTY THAT ANY FIRM OFFER WILL BE MADE.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE 

21^st September 2021

National Express Group PLC ("National Express")

Statement regarding Stagecoach Group plc ("Stagecoach")

Further to the recent announcement by Stagecoach, the Board of National Express, the international and diversified public transport operator, confirms that it is in discussions with Stagecoach, the largest UK bus operator, in relation to a possible all-share combination (the "Potential Combination" to form the "Combined Group").

Under the terms of the Potential Combination, it is expected that Stagecoach shareholders would receive 0.36 new National Express ordinary shares for each Stagecoach ordinary share, resulting in them owning approximately 25 per cent. of the Combined Group.

The Boards of National Express and Stagecoach believe that the Potential Combination would be a strategically compelling proposition with significant growth and cost synergies, as well as delivering strong value creation for both sets of shareholders.

Compelling Strategic and Financial Rationale

It is expected that the Potential Combination would provide an opportunity for the Combined Group to:

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

-  Bring the 'best of both' from the combined operational capabilities of both businesses, whilst also delivering significant benefits to customers and passengers;

-  Accelerate the expansion of National Express' growth businesses, such as private hire coach, corporate shuttle and accessible transport, across Stagecoach's UK footprint, as well as deliver other growth and revenue synergies; and

-  Maintain strong relationships with key public sector stakeholders, best positioning the Combined Group in an evolving industry landscape, with quality public transport playing a critical role in delivering government priorities for cleaner, greener and more resilient economies.

Across National Express' broader international portfolio, the Potential Combination would also yield increased scale and financial flexibility to facilitate continued investment in an attractive and diversified pipeline of high-return growth opportunities in North America and ALSA.

Significant Growth and Cost Synergy Potential

The National Express directors, having reviewed and analysed the potential synergies of the Potential Combination, and having commenced discussions with Stagecoach management to refine this analysis, are confident that as a direct result of the Potential Combination, the Combined Group can realise significant pre-tax cost synergies delivering attractive value for both sets of shareholders. National Express has, to date, identified pre-tax cost synergies that are expected to reach a run-rate of at least £35 million, with approximately 25% achieved by the end of the first year, 85% by the end of the second year and full run rate by the end of the third year following completion of the Potential Combination.

The potential sources of quantified cost synergies include:

· Approximately 1/3 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.

· Approximately 1/3 from shared operational best practice across the combined UK bus network, including:

-  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;

-  Combined and enhanced scheduling, network and route planning to improve efficiencies and reduce overall mileage;

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

-  Additional adoption of operational best practices including best-in-class engineering, process improvement and other efficiencies.

· Approximately 1/3 from additional cost savings, including:

-  Rationalisation of duplicate plc costs, back office and IT processes, digital savings and combined procurement; and

-  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 Potential 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 Code at this time, including:

· Accelerating the regional expansion of National Express' growth businesses, such as private hire coach (NETS), corporate shuttle and accessible transport (NEAT), across Stagecoach's UK footprint, as well as deliver a nationwide solution for rail emergency and routine rail replacement services; and

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

Key Terms

Under the terms of the Potential Combination, it is expected that Stagecoach shareholders would receive 0.36 new National Express ordinary shares for each Stagecoach ordinary share, resulting in them owning approximately 25 per cent. of the Combined Group. National Express shareholders would own approximately 75 per cent. of the Combined Group.

As at close of business on 20^th September 2021 (being the last business day before the date of this announcement), the terms of the Potential Combination implied a premium relative to the price of Stagecoach's ordinary shares of approximately:

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

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

· 17.6 per cent. based on respective last six month volume weighted average share prices.

Governance and Management

It is envisaged that the Board of Directors of the Combined Group would comprise an approximately proportionate share of National Express and Stagecoach directors.

Upon completion of the Potential Combination, it is envisaged that:

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

· Jorge Cosmen would be Deputy Chair of the Combined Group; and

· Ignacio Garat and Chris Davies would be CEO and CFO respectively of the Combined Group.

Structure

It is envisaged that the Potential Combination will be effected by means of a court sanctioned Scheme of Arrangement of Stagecoach.

Completion of the Potential Combination would be subject to receipt, on satisfactory terms, of regulatory and merger control approvals as appropriate, other customary terms and conditions as well as approval by both Stagecoach shareholders and National Express shareholders (the Potential Combination representing a Class 1 transaction for National Express under the Listing Rules).

Important Information

Appendix 1 to this announcement contains further information concerning the statement in this announcement referring to estimated cost savings expected to arise from the Potential Combination, including reports from PricewaterhouseCoopers LLP, BofA Securities and HSBC as required under Rule 28 of the Code.

Appendix 2 to this announcement contains bases and sources of certain information contained in this announcement.

An announcement of a firm intention to make an offer on a recommended basis by National Express under Rule 2.7 of the Code remains subject to the satisfaction or waiver of a number of pre-conditions including, inter alia, the parties reaching final agreement on the other terms and conditions of the Potential Combination, satisfactory completion of customary reciprocal due diligence as well as final approval by the Boards of National Express and Stagecoach. National Express reserves the right in their absolute discretion to waive any or all of these pre-conditions, in whole or in part.

Discussions between the parties and reciprocal customary due diligence remain ongoing and there can be no certainty that an offer will be made.

This announcement does not amount to a firm intention to make an offer under Rule 2.7 of the Code. In accordance with Rule 2.6(a) of the Code, National Express must, by not later than 5.00 p.m. on 19^th October 2021, either announce a firm intention to make an offer for Stagecoach in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer for Stagecoach, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline will be extended only with the consent of Stagecoach and the Takeover Panel in accordance with Rule 2.6(c) of the Code.

Pursuant to Rule 2.5 of the Code, National Express reserves the right to vary the form and / or mix of the offer consideration and vary the transaction structure. National Express also reserves the right to amend the terms of any offer (including making the offer at a lower value):

a)  with the recommendation or consent of the Stagecoach board;

b)  if Stagecoach announces, declares or pays any dividend or any other distribution or return of value to shareholders after the date of this announcement, in which case National Express reserves the right to make an equivalent adjustment to the terms of the Proposed combination;

c)  following the announcement by Stagecoach of a whitewash transaction pursuant to the Code; or

d)  if a third party announces a firm intention to make an offer for Stagecoach on less favourable terms.

A further statement will be made as appropriate.

The person responsible for arranging the release of this announcement on behalf of National Express is Jennifer Myram, National Express Company Secretary.

Enquiries:

National Express

Chris Davies, Chief Financial Officer	[phone]
Louise Richardson, Head of Investor Relations	[phone]

Advisers

BofA Securities (Lead Financial Adviser and Corporate Broker to National Express)	[phone]
David Lloyd Ed Peel
Justin Anstee
Geoff Iles
HSBC (Financial Adviser and Corporate Broker to National Express)	[phone]
Anthony Parsons
Sam McLennan
Jon Connor
Alex Thomas
Maitland/AMO (Public Relations Adviser to National Express)
Neil Bennett	[phone]
James McFarlane	[phone]

Ashurst LLP is acting as legal adviser to National Express in connection with the Potential Combination.

Other Important Information

This announcement is not intended to, and does not, constitute, represent or form part of any offer, invitation or solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities or the solicitation of any vote or approval in any jurisdiction whether pursuant to this announcement or otherwise. Any offer, if made, will be made solely by certain offer documentation which will contain the full terms and conditions of any offer, including details of how it may be accepted.

The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.

Merrill Lynch International ("BofA Securities"), which is authorised by the Prudential Regulation Authority ("PRA") and regulated by the Financial Conduct Authority ("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 Bank plc ("HSBC"), which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Financial Conduct Authority and the Prudential Regulation Authority, 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.

Website Publication

In accordance with Rule 26.1 of the Code, a copy of this announcement will be made available, subject to certain restrictions relating to persons resident in restricted jurisdictions, on National Express's website (www.nationalexpressgroup.com) by no later than noon (London time) on the business day following this announcement. The content of this website is not incorporated into and does not form part of this announcement.

Rule 2.9 Information

In accordance with Rule 2.9 of the Code, National Express confirms that as at the close of business on 30^th June 2021 its issued share capital consisted of 614,086,377 ordinary shares of 5 pence each with voting rights and admitted to trading on the main market of the London Stock Exchange under the ISIN GB0006215205.

Disclosure Requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% 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 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (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 Code, any person who is, or becomes, interested in 1% 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 pm (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 Takeover 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 [phone] if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Appendix 1 - Quantified Financial Benefits Statement

Part A

The section of this announcement referring to the financial impact of the Potential Combination includes statements of estimated cost savings expected to arise from the Potential Combination (together, the "Quantified Financial Benefits Statement").

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

The National Express directors, having reviewed and analysed the potential synergies of the Potential Combination, and having commenced discussions with Stagecoach management to refine this analysis, are confident that as a direct result of the Potential Combination, the Combined Group can realise significant pre-tax cost synergies delivering attractive value for both sets of shareholders. National Express has, to date, identified pre-tax cost synergies that are expected to reach a run-rate of at least £35 million, with approximately 25% achieved by the end of the first year, 85% by the end of the second year and full run rate by the end of the third year following completion of the Potential Combination.

The potential sources of quantified cost synergies include:

· Approximately 1/3 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.

· Approximately 1/3 from shared operational best practice across the combined UK bus network, including:

-  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;

-  Combined and enhanced scheduling, network and route planning to improve efficiencies and reduce overall mileage;

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

-  Additional adoption of operational best practices including best-in-class engineering, process improvement and other efficiencies.

· Approximately 1/3 from additional cost savings, including:

-  Rationalisation of duplicate plc costs, back office and IT processes, digital savings and combined procurement; and

-  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 Potential Combination.

The synergies referred to above are expected to be recurring and are expected to arise as a direct result of the Potential Combination and could not be achieved independently of the Potential 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 below.

Bases of Belief and Principal Assumptions

Following initial discussions regarding the Potential Combination, a National Express synergy development team has been established to evaluate and assess the potential synergies arising from the Potential Combination (the "National Express Synergy Team" or 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 has commenced discussions with Stagecoach management to refine this analysis.

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 Potential 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' FY19 (for Coach) and FY21 (for Bus) financial results and Stagecoach's FY20 financial results.

In assessing potential synergies expected to arise from the Potential 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 Code, PricewaterhouseCoopers LLP ("PwC"), as reporting accountants to National Express, and BofA Securities and HSBC, as financial advisers 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 1.

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' earnings in the first full year following completion of the proposed acquisition, 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")

Merrill Lynch Financial Centre

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")

21 September 2021

Dear Ladies and Gentlemen,

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

We report on the quantified financial benefits statement (the "Statement") by the Directors included in Part A of Appendix 1 of the Rule 2.4 announcement dated 21 September 2021 (the "Announcement") to the effect that:

The National Express directors, having reviewed and analysed the potential synergies of the Potential Combination, and having commenced discussions with Stagecoach management to refine this analysis, are confident that as a direct result of the Potential Combination, the Combined Group can realise significant pre-tax cost synergies delivering attractive value for both sets of shareholders. National Express has, to date, identified pre-tax cost synergies that are expected to reach a run-rate of at least £35 million, with approximately 25% achieved by the end of the first year, 85% by the end of the second year and full run rate by the end of the third year following completion of the Potential Combination.

The potential sources of quantified cost synergies include:

· Approximately 1/3 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.

· Approximately 1/3 from shared operational best practice across the combined UK bus network, including:

-  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;

-  Combined and enhanced scheduling, network and route planning to improve efficiencies and reduce overall mileage;

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

-  Additional adoption of operational best practices including best-in-class engineering, process improvement and other efficiencies.

· Approximately 1/3 from additional cost savings, including:

-  Rationalisation of duplicate plc costs, back office and IT processes, digital savings and combined procurement; and

-  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 Potential Combination."

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

Opinion

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

This Statement has been made in the context of disclosure in Part A of Appendix 1 of 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 make 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 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 1 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 National Express 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. 

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.

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 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 can 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

PricewaterhouseCoopers LLP, 1 Embankment Place, London, WC2N 6RH

T: [phone], F: [phone],  www.pwc.co.uk

PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC303525.  The registered office of PricewaterhouseCoopers LLP is 1 Embankment Place, London WC2N 6RH. PricewaterhouseCoopers LLP is authorised and regulated by the Financial Conduct Authority for designated investment business.  

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

21^st September 2021

Dear Sirs,

Possible offer for Stagecoach by 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 the Appendix 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 "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 the Appendix 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 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 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,

BofA Securities

HSBC Bank plc

Appendix 2 - Bases and Sources

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

1.  References to ownership of the Combined Group have been based on National Express' and Stagecoach's respective fully diluted share capital (assuming for these indicative purposes full dilution from all dilutive instruments of National Express and Stagecoach in issue as at the date of this announcement), being:

· 824,182,126 National Express ordinary shares (including 203,974,502 new National Express ordinary shares to be issued to Stagecoach shareholders pursuant to the terms of the Potential Combination at an exchange ratio of 0.36 National Express ordinary shares per Stagecoach ordinary share); and

· 566,595,838 Stagecoach ordinary shares.

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

3.  The synergy numbers are unaudited. Further information underlying the Quantified Financial Benefits Statement in this announcement is provided in Appendix 1, including reports from PricewaterhouseCoopers LLP, BofA Securities and HSBC as required under Rule 28 of the Code.

4.  Certain figures included in this announcement have been subject to rounding adjustments.

 

END

 

 

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