TRANSPORT firm Stagecoach confirmed yesterday that it had approached National Express about a possible merger.In the latest twist in the saga of troubled National Express - which operates the vast majority of rail services in the east of England as well as coach services across the country - Stagecoach said it had made its move after Friday's news that other suitors for the company - led by its largest shareholder, the Spanish Cosmen family - had withdrawn from �765m takeover talks.

TRANSPORT firm Stagecoach confirmed yesterday that it had approached National Express about a possible merger.

In the latest twist in the saga of troubled National Express - which operates the vast majority of rail services in the east of England as well as coach services across the country - Stagecoach said it had made its move after Friday's news that other suitors for the company - led by its largest shareholder, the Spanish Cosmen family - had withdrawn from �765m takeover talks.

Stagecoach - which already has a presence in the eastern region via its East Midlands Trains franchise, running services between Norwich and Liverpool - had been lined up to take on National Express's UK rail and bus business under the plans drawn up by the Cosmens and buyout firm CVC.

But the merger hopes mark a U-turn for Stagecoach, which had previously ruled itself out of bidding alone for National Express.

Stagecoach said it submitted a letter on Friday outlining aims for a deal that would see National Express take up to 40pc of the merged group, estimated to be worth �1.7bn. It claimed to have been invited by the National Express board to make the move.

Backing from the National Express board will be key to any deal, as Stagecoach is prevented from making an offer without the group's recommendation for six months under City takeover rules, following its decision to walk away from a standalone bid last month.

However, the Stagecoach proposal appears to have received a lukewarm response so far from National Express. It said it would “carefully consider” the proposal but added: “It is now necessary to rapidly conclude this phase of potential corporate activity to avoid further disruption to the business and to allow the group to secure additional equity funding before the end of 2009.”

The group also denied any approach had been made from First Group, reported at the weekend to be mulling a takeover move. As with Stagecoach, First is bound by strict takeover rules after it backed out of the running in July.

National pledged at the end of last week to refocus on shareholder fundraising to ease its �1bn debt pile in the wake of the Cosmen consortium's withdrawal.

The Cosmens, the largest shareholder in National Express with 18.5pc, had been working on a potential deal with buyout firm CVC. But reports suggested there were concerns among its would-be buyers over the refinancing terms for part of National's debt due next year.

The Cosmens said they would instead support National's plans for a rights issue - news that saw National's shares slump by 23pc on Friday. But the share price rebounded yesterday, closing up 10pc at 400p.