DX investor gives blessing to tie-up with Menzies arm
● Gatemore Capital Management says new terms ‘significantly improve’ deal
A major investor in parcels business DX Group has given its backing to revised terms for the firm’s reverse takeover by the distribution arm of Edinburgh-based John Menzies.
Gatemore Capital Management, which controls 21.3 per cent of DX, had previously voiced its opposition to the deal, arguing that it had appeared to be a “bad deal for DX shareholders”.
But Gatemore managing partner Liad Meidar said the revised agreement – which will see DX investors own 35 per cent of its enlarged share capital, rather than the 20 per cent previously proposed – “significantly improves the terms of this deal”.
He added: “We were pleased to have been able to work productively with both the DX and Menzies boards. We believe that shareholders will be pleased by the revised terms that have been agreed upon, which is why we have agreed in turn to vote in favour of the transaction.”
Under the revised terms of the deal, DX will acquire Menzies Distribution on a debtfree basis for £40 million in cash, down from the £60m previously proposed, and the issue of new DX shares representing 65 per cent – rather than 75 per cent – of its issued share capital.
Menzies, which recently acquired US aviation services firm ASIG in a “transformational” deal worth $202m (£157m), had been under pressure from its investors to consider a break-up.
Its tie-up with DX is expected to generate annual savings of about £10m, but Menzies’ corporate affairs director John Geddes has previously told The Scotsman that much of these would come from property, vehicles and backoffice operations, with limited impact on the distribution unit’s 3,500-strong workforce.
Although the two groups stressed there was no certainty of the deal going ahead, they are targeting completion during the summer, adding: “The proposed transaction structure enables both DX and John Menzies shareholders to share in the significant potential value created by the combination of DX and Menzies Distribution, whilst increasing substantially the liquidity of DX’S ordinary shares and enabling the divestment of Menzies Distribution into a separately quoted company.
“The boards of DX and John Menzies believe respectively thatthetransactionwouldcreate strategically focused companies, each of which would have a strong balance sheet and the financial resources to invest in the future of their respective businesses.”
Alongside the transaction, which will see about 17 per cent of John Menzies’ defined benefit pension scheme transfer to the enlarged group, Menzies plans to raise some £30m through a share placing.
In a joint statement, DX chairman Bob Holt and Menzies chair Dermot Smurfit said: “We are pleased to have reached this agreement and believe that the revised terms of the proposed transaction represent an attractive opportunity for all stakeholders.”