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National Express pulls plug on Stagecoach deal

Beleaguered transport group National Express yesterday pulled the plug on a potential merger with Stagecoach citing possible competition issues and a delay in completing a deal. As a consequence, the company is now set to push ahead with a fundraising before the end of the year although there is significant doubt as to whether investors are supportive of the current board and set up of the company.

The need to push ahead with the deal before Christmas is paramount because the company faces a further £5 million penalty in interest payments on its mounting £1.2 billion debt pile. The move has shocked Stagecoach which had been waiting to receive clearance to look at National Express's books ahead of a potential merger. Due to complicated takeover and merger rules, Stagecoach was only allowed to contemplate a merger after being "invited" by the National Express board to talk about a potential deal.

As the company initially ruled out a potential deal with National Express in September, a six-month bar is now in place during which time the company cannot instigate a takeover or merger with National Express unless asked to do so by the company. This is yet another blow for National Express shareholders and the future is somewhat clouded, at least in the short term.

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