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Darrell Delamaide: Cosmens miss the train as listed vehicle hits trouble

Jorge Cosmen is not stupid – or so one would presume, given that he is a leading representative of one of Spain's most successful business families. But his attempts to put his family at the heart of the UK transport industry have exposed the difficulties in dealing with listed companies.

The family, which traces its involvement in the transport business back to 1728, built up the largest bus service in Spain and operates successful transport companies in China and South America.

Cosmen, deputy chairman of the board, offered to buy out National Express' other shareholders at a handsome premium, so why is he at odds with the board and its shareholders?

The family, the largest shareholder in National Express with 18.5%, did not come out right away with the final offer of 500 pence, earning a xenophobic diatribe from shareholder Andy Brough at Schroders Investment Management, who accused them of dragging their feet. "In Spain there is a name for it – mañana, mañana, mañana," he told a newspaper.

Is this a clue? Do British shareholders not want a Spanish family, with all its putative mañana ways, running UK transport? In this case the Cosmens' partner in the bid, CVC Capital Partners, got cold feet at the 500-pence level and withdrew the bid after due diligence.

Cosmen's next suggestion was to merge National Express with rival Stagecoach Group. There was speculation that the family could then walk away with the UK coach services as well as reclaiming the Alsa bus service that brought them into National Express in the first place. But the board rejected the Stagecoach offer in favour of a £360 million rights offering to reduce leverage and keep it from violating bank covenants.

Perhaps understandably, after so much rejection, the Cosmens have not been supportive of the rights offer. Cosmen voted against the measure because, he said, he does not feel it is in the best interests of the company or its shareholders.

Brough pounced again, accusing the family of not having the cash to take up their rights. "I think their cheque book has run out of cheques," he said. Although Cosmen said he will lobby with other shareholders to reject the rights proposal, the family left the door open to taking up all or part of their rights. If they don't take up any, the dilution would reduce their share to less than 6% and could cost Cosmen his board seat.

At this point, the Cosmen family may wish it had never accepted National Express stock in partial payment for Alsa, in 2005. The family has since lost more than £150 million on the deal. National Express gave up its East Coast rail line and may lose its right to operate others as a consequence. CEO Bowker left in July and no replacement has been named.

Perhaps the board knows best and National Express will actually have some muscle to flex after the rights offer, even if the Cosmen family sits it out. But the rights issue makes it much more difficult to consummate a merger, and it will take shareholders a long time to make the new shares pay. Rights issue or not, the board and the shareholders supporting its decisions intended to shaft the Cosmens, who have been exposed as both savvy and naïve. Savvy enough to find a better strategy, but naïve enough to think all shareholders would keep the best interests of the company at the forefront of their minds. 

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