STAGECOACH is expected to pay the government about £100 million as a "change of control" payment to take over National Express's rail business even though many City analysts believe it is a high price to pay.
The Perth-based transport group is understood to be planning to reassure its institutional investors that it is not overpaying, sources say.
The Scottish company is expected to argue that any amount paid to the Department for Transport will in ef
fect be taken off what it will have paid for National's rail and bus assets if the Cosmen family/CVC consortium bid for National is successful.
Stagecoach has an agreement with the consortium to buy those assets – not including the lossmaking East Coast franchise, which is reverting to government ownership – for an undisclosed sum if its bid goes through. Stagecoach declined to comment yesterday, citing confidentiality.
A Department for Transport spokesman said: "Discussions between the DfT and any party interested in buying National Express are commercially sensitive and are confidential."
The payment to the government is in exchange for an agreement that the government will not force Stagecoach to give up National's profitable East Anglia and C2C franchises as a "cross default" punishment for National's failure to honour its £1.4bn East Coast contract.
However, East Anglia and C2C currently have combined operating profits of only about £30m a year – less than a third of what Stagecoach is to stump up for the government.
The C2C franchise runs out in May 2011, although Stagecoach is believed to be privately confident that the government will agree to extend the East Anglia contract from 2011 to 2014.
