National Express has unveiled plans for a potential all-share takeover of rival Stagecoach in a move that would bring together two of the UK’s biggest transport groups.

Under the terms of the possible tie-up, National Express would own around 75% of the combined group and Stagecoach shareholders around 25%.

The deal would value Stagecoach at £445 million.

It comes after both firms have been hit hard by the pandemic, with passenger numbers slumping due to lockdowns, remote working and a switch away from public transport.

The groups have outlined plans to slash costs as part of the potential merger, with National Express saying it expects to find annual savings of at least £35 million, with around 25% by the end of the first year.

If the talks lead to a deal, the combined group would see Stagecoach chairman Ray O’Toole become chairman of the board.

National Express boss Ignacio Garat would be chief executive of the enlarged group.

National Express has bus and coach networks across the UK and Spain, while it also runs school bus services in America and a rail franchise in Germany.

But Stagecoach is UK focused and is Britain’s biggest bus and coach operator.

National Express said the deal would allow it to use Stagecoach’s depot network to run and maintain its coach operations, while also allowing it to expand its new growth initiatives – such as private coach hire, corporate shuttle and accessible transport – across Stagecoach’s UK operations.

The talks come after National Express rejected a £1.7 billion merger deal mooted by Stagecoach in 2009.

This former attempt at a merger between the two would have seen Stagecoach own the majority of the combined group, with National Express left with up to 40%.

The two firms stressed that the latest merger talks are ongoing and that there is no certainty a formal offer will be made.

National Express has until 5pm on October 19 to make a firm offer or walk away, under City Takeover Panel rules.

Shares in Stagecoach soared as much as 25% on news of the takeover talks, while National Express jumped more than 10% higher.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said: “Given that the pandemic blew out the tyres of their business models and it’s been such a slow road back to health ever since, it comes as little surprise that rivals National Express and Stagecoach are now considering getting together to try and shoulder the recovery together.

“Consolidation in the hard-hit travel sector has been expected and it appears the bus coach and rail business is ripe for restructure.”