(Bloomberg) -- Stagecoach Group Plc said it’s exploring a possible takeover by rival U.K. bus operator National Express Group Plc.

The two transport groups are discussing an all-share deal giving Stagecoach investors 0.36 new National Express shares for each share held, or 25% of the combined group, according to a statement Tuesday. That represents an 18% premium based on respective closing prices, it said.

“The potential combination would be a strategically compelling proposition with the potential to realize significant growth and cost synergies, as well as delivering strong value creation for both sets of shareholders,” Perth, Scotland-based Stagecoach said in the release.

Bloomberg News reported Monday that National Express was looking at making a bid.

A takeover of Stagecoach, which has a market value of 375 million pounds ($513 million) after its stock gained 87% in the past 12 months, would help National Express expand while keeping down costs through the sharing of bus depots, routes and office functions. A bigger firm would also be better placed to make investments required as Britain moves to de-carbonize its bus fleet.

Stagecoach’s co-founders, Scottish businessman Brian Souter and his sister Ann Gloag, began paring their stakes earlier this year as part of a plan to cut the holding to 5% in a decade.

The company has a fleet of over 8,000 buses and coaches serving more than 100 towns and cities, according to its website, including operations in London, Manchester, Liverpool, Newcastle and Sheffield. It also operates the low-cost intercity Megabus service.

National Express appointed former FedEx Corp. executive Ignacio Garat as group chief executive officer last year.

The company, which has a market value of 1.4 billion pounds, is the biggest operator of long-haul coach services in the U.K. as well as the second-biggest school bus operator in the U.S., according to its annual report. The company’s bus division is the market leader in England’s West Midlands region.

Stagecoach exited the U.K. franchised rail market in 2019 after being disqualified from bidding for three concessions, including the prestigious West Coast route it had operated with Virgin Trains.

Stagecoach at the end of June reported full-year sales and profit that beat estimates, helped by the easing of Covid restrictions and a rebound in traffic. The company is targeting a zero emissions U.K. bus fleet by 2035 and forecast a “positive outlook” for the bus, coach and tram services amid efforts to tackle climate change and support an economic recovery, it said at the time. 

Any tie-up would mark the latest round of dealmaking in the bus industry. FirstGroup Plc agreed earlier this year to sell its U.S. school bus business for $4.6 billion sale to Swedish investment firm EQT AB amid pressure for the U.K. transport group to realize the value of its global assets.

National Express has recently been in acquisition mode, agreeing in June to buy Spanish bus group Transportes Rober in a 13 million-euro ($15 million) deal.

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