Broker snap: FirstGroup's National Express bid is opportunistic

29th Jun 2009 11:49

The bid by FirstGroup for rival train and bus operator National Express is opportunistic, according to Panmure Gordon, given the latter's problems on its East coast franchise which are pushing the company into the red."With the exception of rail, National Express's assets are quite attractive, although there may be some competition issues in North America and possibly the UK," reckons Panmure Gordon analyst Gert Zonneveld.National Express has rejected the "highly preliminary approach" from FirstGroup, saying: "At the present time, the board is focused on implementing a number of initiatives to strengthen the group and does not consider it appropriate to enter into discussions with FirstGroup."Panmure believes that if National Express survives as an independent company it will need to raise a substantial chunk of new equity. "Given the current market cap of £417m, a 1.6 for 1 rights issue at a discount of 40% would raise around £400m For now we see no reason to change our Hold recommendation," the broker concludes.