Monday October 19, 09:23 AM
STOCKS NEWS UK-National Express up on Stagecoach approach
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08:04GMT 19Oct2009-National Express (LSE: NEX.L - news) up on Stagecoach approach
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Shares in National Express gain 9.5 percent to 396 pence after the bus and rail company says it has been approached by rival Stagecoach over a possible merger.
The shares claw back some of the losses incurred on Friday after the firm announced takeover talks with the Cosmen family had collapsed.
Stagecoach shares are down 3 percent.
At Friday's closing prices and assuming National Express shareholders receive 40 percent of the combined group as slated, Arbuthnot estimates an implied price of around 480 pence per share, while Panmure Gordon puts it at about 490 pence.
'We are not sure that National Express will view this as compelling,' says Arbuthnot, which has a 'reduce' stance on the stock.
'An all-share transaction with Stagecoach may offer apparent initial value, and dilute the downside risks faced by National Express, but it would also dilute the upside potential if a financial restructuring were to be completed successfully, the East Anglia and c2c franchises retained and current trading turned around.'
Panmure Gordon, meanwhile, maintains its 450 pence target price and moves its recommendation to 'buy' from 'hold', following last week's share price drop.
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