UK bus operator Stagecoach has dropped support for a £1.9billion merger with National Express, instead agreeing to be taken over by a major German infrastructure fund in a deal £595 million.

In a sudden reversal, Stagecoach said it was recommending a sale to the DWS Infrastructure-managed fund for 105p per share in cash and withdrew its support for National Express’ offer.

The announcement came just hours before Stagecoach suffered a strategic blow in its bid to shut down the bus franchise in England. Last year Stagecoach and partner Rotala won a judicial review of Greater Manchester’s plans to introduce franchising, but in a judgment on Wednesday the plans were upheld as legal.

Stagecoach has fought hard against plans to reverse the deregulation that enabled its initial growth in the 1980s. Andy Burnham, Mayor of Greater Manchester, said the verdict was “truly fantastic news for all those outside of London who want to see a return to a bus service that puts people before profit” and “a green light for the north to regain control of its bus and public transport system”.

Stagecoach shares ended up 36% that day despite the verdict, with shareholders set to take advantage of DWS’s offer to replace the all-stock deal apparently struck in December that would have brought together local bus operations from Stagecoach in the UK with National Express’s intercity coach network. .

The merger was the subject of an investigation by the Competition and Markets Authority, which issued a first enforcement order in January to prevent the companies from combining their activities or selling British businesses during that she was reviewing the deal.

DWS, spun off from Deutsche Bank in 2018 via an IPO in Frankfurt, holds a number of other UK investments including Corelink Rail Infrastructure; Kelda, owner of Yorkshire Water; and Ports Peel.

Stagecoach said DWS’ offer provided greater certainty for investors and its 24,000 employees, with the overall workforce of bus drivers expected to remain the same, while Stagecoach’s headquarters in Perth, central Scotland, will be retained with its staff. He added that the new deal, which is expected to be completed in the first half of this year, would also ensure continuity at the top, with the chief executive, chief financial officer and remaining UK chief executive.

Martin Griffiths, Managing Director of Stagecoach, said: “The proposed offering presents a major opportunity to maximize the significant growth potential ahead as governments seek to deliver economic recovery, improve communities, deliver better outcomes citizens and move to a net zero future.

“We believe this will open an exciting new chapter for Stagecoach, backed by a team that shares our vision for a more sustainable future.”

Stagecoach was started in 1980 by a Scottish businessman, Sir Brian Souter, and his sister, Dame Ann Gloag. The takeover of DWS will mark the end of the Souter family’s long-standing interest in the sector, which has grown from buying a small local bus company to being one of the major players in the privatized UK bus and railroad industries. iron.

Under the terms of the DWS takeover, Souter’s 14.5% stake in Stagecoach is worth £86.2m, while Gloag’s 10.5% stake is worth £62.5m.

In recent years Stagecoach has shrunk, having sold its US business and been squeezed out of UK rail. National Express also exited UK rail after selling its last franchise in 2017, but still operates trains in Germany and buses in the US, Canada, Morocco and Spain.