Menzies walk away from £40m merger talks

Distribution arm of Scottish logistics group will remain in-house

A proposed £40 million merger between the distribution arm of John Menzies and DX Group has been scrapped.

It follows a profit warning by Berkshire-headquartered DX Group earlier this year in which it cautioned over “challenging” trading conditions, and a management overhaul at the parcel delivery and logistics firm last month.

The firms had been in discussions since June about DX acquiring Edinburgh-based John Menzies’ distribution unit for £40 million.

However, John Menzies said in a stock market announcement yesterday that, following additional due diligence on DX Group after a July trading update, it “became apparent” that any deal would require revised terms.

For that reason, despite “strong strategic and commercial benefits” which would arise from a tie-up, the group said it had walked away from the proposed deal.

“Despite further discussions with DX following the DX announcement of 14 July 2017, the John Menzies board does not believe it is currently possible to agree a revised set of terms with DX for the combination which would be in the interests of John Menzies shareholders,” the firm said in a statement to the stock exchange

“John Menzies has therefore terminated discussions with DX.”

John Menzies said it continues to believe in the merits of separating the aviation and distribution divisions into two independent businesses at the “appropriate time.”

DX Group chairman Bob Holt said: “Our talks with John Menzies have been constructive and the proposed combination of DX and Menzies Distribution division was potentially highly attractive to both sets of shareholders.

“However, it has become clear that we would not be able to agree terms that would be acceptable to our shareholders and since we have a strong alternative business transformation plan in place, we have decided that it is in the best interests of our shareholders for us to pursue this course.

“Our major shareholder and our bankers are supportive of the proposed plans for the business on a stand-alone basis and we have been exploring new financing options with our bankers.”

DX Group’s largest shareholder, Gatemore Capital Management, expressed optimism about the company’s ability to go it alone.

Gatemore’s managing partner, Liad Meidar, said: “We are excited about the prospects for DX as a stand-alone company.”

The Menzies Distribution fleet makes more than 25,000 retail drops each day.