EAST Coast Main Line operator National Express yesterday rejected a takeover approach from rival transport group Stagecoach and will instead look to shareholders for a way out of its financial troubles.

Stagecoach had made a preliminary offer for National Express, laden with debt after purchasing the East Coast franchise before the recession hit, which would have seen the latter take up to 40 per cent of the merged group, worth £1.7bn.

But yesterday, National Express said it was unlikely a tieup with Stagecoach could be achieved this year, even if suitable terms were agreed, and that it would press ahead with its own rights issue to help ease its £1bn debt pile.

Last night, Stagecoach rejected this, and said a merger would have provided benefits for National Express, including repairing the firm’s relationship with the Department for Transport, which was damaged when it pulled out of its loss-making East Coast Main Line franchise.

It said it would not make another bid within six months, barring a change in circumstances.

National Express, which slumped into the red during the first half of this year after losing more than £20m on its East Coast Main Line franchise, is still in discussions about handing back the London-to-Edinburgh route, which it paid £1.4bn for at the height of the economic boom.

National Express has been the centre of takeover interest for some months, including a planned £765m bid by a consortium led by its largest shareholder, the Spanish Cosmen family, and which also included Stagecoach.

The East Coast Main Line operator, which last week warned annual profits would fall below expectations, said yesterday that after evaluating the value and certainty of the Stagecoach offer it had concluded that it would not be completed this year.

Stagecoach is the operator of South West Trains and East Midlands Trains.