Menzies calls off £40m tie-up with parcels group DX

● John Menzies says deal would not be in ‘best interests’ of its shareholders

proposed £40 million merger between the distribution arm of Edinburgh-based John Menzies and DX Group has been ditched.

It follows a profit warning by DX Group earlier this year when it flagged tough trading conditions, followed by the chief executive and finance director quitting the parcel delivery and logistics firm last month after a business review.

The two companies had been in extensive talks about DX joining forces with Menzies Distribution, with the deal first announced in March.

But John Menzies, which is due to report its half-year results today, said yesterday that following additional due diligence on DX Group in the wake of the July trading update it became apparent that any transaction would require revised terms.

The Scottish group said that despite the “strong strategic and commercial benefits” a deal would give, it had “terminated” the talks.

In a stock exchange statement, Menzies said: “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 announcement also comes just over a month after City of London Police dropped plans for a full-scale probe into DX Group following allegations made against its document delivery service, DX Exchange.

DX said it had co-operated with the preliminary investigation and made changes to the “internal business processes” of the operation.

The latter handles documents such as contracts, deeds, property settlements, financial agreements and barrister’s briefs for more than 25,000 clients across the UK and Ireland.

Menzies insisted that it conthe tinued to believe there was merit in separating its aviation and distribution divisions into two independent businesses at the “appropriate time”.

The group, which recently acquired US aviation services firm ASIG in a “transformational” deal worth $202m (£155m), has been under investor pressure to consider a break-up of its business.

DX Group’s largest shareholder, Gatemore Capital Management, expressed its optimism about the company’s ability to go it alone as it said it had secured the support of the DX board to appoint four “highly experienced” directors with a “track record in effecting remarkable turnarounds in the logistics sector”.

Liad Meidar, Gatemore’s managing partner, said: “We are excited about the prospects for DX as a stand-alone company, especially under the leadership of the new board.

“Each of the four new directors brings significant sector experience. Ron Series and Lloyd Dunn can in fact be directly credited with the remarkable turnaround of Tuffnells, DX’S main competitor in freight.”