National Express, the international transport company, announced on Tuesday 21st September, that they are in merger discussions, in all-share deal, with UK public transport operator, Stagecoach. The suggested deal appears to make strategic sense for both parties as it combines the two operations to enable significant annual cost savings (“at least £35 million”) and accelerate growth. In our opinion it is a sensible step forward and should help to unlock the potential for both sets of shareholders. We hold a position in National Express in the Columbus European MidCap Equity Fund (2.1%).The shares in National Express rose by 8% on the announcement of the combination of both businesses.
We bought the shares in National Express, after the Covid associated sell-off, when we felt strongly the franchise of the business was no longer reflected in the share price. We were able to take advantage of the short-term disruption with a view to the longer-term recovery. It appears we were not alone in seeing hidden value in this business.
The Columbus European Mid Cap Fund is a concentrated, long only portfolio with a long-term investment horizon. The majority of the fund comprises high quality, structurally growing businesses with proven competitive advantage. As significant investors in the fund ourselves we have deep conviction in the companies, as well as their highly attractive investment potential. Outside this majority core of high quality companies we can take a more opportunistic approach where we see companies that are trading well below intrinsic value, as in this case.
