STRUGGLING transport group National Express was involved in a public slanging match with its biggest shareholder today after it ended merger talks with rival Stagecoach.

Spain’s Cosmen family, which owns 18.5% of National Express, voiced "serious concerns over the absence of a well-defined strategy" and said the board had dismissed the merger too quickly.

The Cosmens - who abandoned their own £765 million takeover two weeks ago - called on the firm to seek independent advice on its options.

They warned: "We are greatly concerned that the board risks losing further value for all shareholders by not keeping the company’s options open and we would urge the board to seek independent financial and legal advice to assist it in this review process."

But National Express, which is burdened with almost £1 billion in debts, said it had "carefully explored" a range of strategic options.

The firm is pursuing a major fundraising - likely to be around £400 million - from shareholders because of doubts over whether the merger could be completed before the end of the year.

If the merger was not completed in time it would mean a breach of banking covenants, higher costs and "significant uncertainty" for shareholders, it said.

"The board believes it is in shareholders’ best interests that an equity fundraising be undertaken as soon as possible to secure a sustainable capital structure for the group," it added.

Shares in National Express rose almost 4% today amid speculation that the firm’s board would look again at a Stagecoach merger.

Collins Stewart analyst Andrew Fitchie said "perhaps there will be a rethink".

He added: "Clearly the Cosmens are not convinced all parties are acting in the best interest of shareholders. Cynically, one could argue that the company’s brokers and advisors would be best served by generating fees through an equity raise.

"And the executives will keep their jobs if they pursue an independent future... turkeys don’t vote for Christmas!"

The Cosmens, which took their stake in National Express in 2005, said they remained "entirely focused" on the long-term interests of the business.

Under City takeover rules, the Cosmens - who were working on an offer in tandem with buy-out firm CVC - are currently barred from making an offer without a recommendation from the National Express board or unless another company makes a firm intention to bid.

Stagecoach had submitted a preliminary offer that would have seen National Express take up to 40% of the merged group, worth £1.7 billion.

But National Express, which recently warned on profits, judged the deal was unlikely to go ahead this year and decided to press on with a fundraising as a standalone business.

The firm is still in discussions about handing back the East Coast Main Line franchise - which it paid too much for at the height of the boom to the Government.

Its other UK rail franchises are the East Anglia service and London commuter operation c2c, while it also has a bus division.

Stagecoach - the operator of South West Trains and East Midlands Trains - had been lined up to take on National Express’s UK rail and bus business under the plans drawn up by the Cosmens and CVC.

After the Cosmen bid collapsed, Stagecoach decided to make its own offer for the National Express business.