Spain's Cosmen family reported to be backing US hedge fund seeking shakeup of transport group
National Express is heading for another boardroom showdown with its second largest shareholder, the Spanish Cosmen family, after an activist US investor claimed it has won the support of the powerful transport dynasty.
Only last week National Express suggested that it had the full support of the dynasty, whose leader Jorge Cosmen is the bus and train group's deputy chairman. However, Elliott Advisors, the US hedge fund that owns 17.5% of National Express, said it now expects the Cosmens to back its plan to appoint three new non-executive directors to the group's board.
The threat of a fresh stand-off with the Cosmens comes less than two years after the family linked with private equity group CVC to table a joint takeover bid for National Express. The Cosmens expressed "serious concerns" about the company's strategy, but the offer was rebuffed and the family were eventually won over and signed up to a rescue rights issue months later.
National Express has accused Elliott of flouting corporate governance standards and says a search for non-executive directors is underway. National Express is urging investors to "strongly to vote against (the resolutions)" at the annual meeting on 10 May.
Institutional investors including M&G, with a 13% stake in National Express, and Co-operative Asset Management, with 2.7%, have expressed public support for the transport group's board. Sources close to the situation also pointed to the lack of public backing from the Cosmens and described the Elliott statement as an "assertion" with no firm proof of Spanish support.
Nonetheless, if Elliott's statement is borne out by the Cosmens' backing, it would represent an about-turn by the family after it appeared to back an aggressive National Express statement last week in which the board criticised the hedge fund's manoeuvres.
Pirc, the corporate governance group, has also raised concerns. This month it said that "any non-executive director nominated by a share owner is subject to a likely conflict of interest between their duty to the company and its shareholders, and their position as a representative of a single share owner."
With the Cosmens' support, Elliott's resolution has the backing of 34% of the company's shareholders, which means that the hedge fund need only find support from shareholders representing a further 16% of the business to force its candidates onto the board.
Elliott wants National Express to consider beefing up its US activities and seek a big merger in the UK, where it fears the group could be beaten in the rail market by state-owned European competitors such as France's SNCF and Germany's Deutsche Bahn. Those concerns gained momentum last month when National Express was surprisingly excluded from the shortlist for the Greater Anglia rail franchise, where it is the incumbent operator. However, DB also failed to make the cut.
National Express moved to reassure investors that its exclusion was not a hangover from the East Coast debacle in 2009 when it handed back a £1.4bn contract for the London-to-Edinburgh rail route, but that leaves the Thames estuary c2c franchise as its last significant foothold in the rail market.
The head of the UK bus and rail user watchdog, Passenger Focus, said the prospect of National Express's UK operations falling into foreign ownership should not alarm transport users. "The general passenger doesn't care who owns the services so long as the basics are delivered. What they are concerned about is value for money and punctuality."