DX investor backs revised terms for Menzies tie-up

Gatemore said the revised terms of Menzies Distribution's tie-up with DX were better for all shareholders. Picture: Contributed
Gatemore said the revised terms of Menzies Distribution's tie-up with DX were better for all shareholders. Picture: Contributed
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A major investor in parcels business DX Group has given its blessing 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”.

• READ MORE: Menzies in talks to merge distribution arm with DX
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 for all shareholders”.

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.”

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Under the revised terms of the deal, DX Group will acquire Menzies Distribution on a debt-free 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.

Newspaper distributor and baggage handler Menzies, which recently acquired US aviation services firm ASIG in a “transformational” deal worth $202m (£157m), had been under investor pressure to consider a break-up of its business.

Its tie-up with DX is expected to generate annual cost savings of about £10m, but Menzies’ corporate affairs director John Geddes has previously told The Scotsman that much of the synergies would come from property, vehicles and back-office operations, with limited impact on the distribution unit’s 3,500-strong workforce.

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The two groups said: “DX and John Menzies believe 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 in line with John Menzies’ strategy.

“The boards of DX and John Menzies believe respectively that the transaction would create 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 for the benefit of each company’s stakeholders.”

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 conditional cash placing of new shares, mainly to institutional investors, the proceeds of which would be retained by the group when the deal completes.

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 of both companies.”

Although both firms stressed that there was no certainty of the deal going ahead, they continue to target completion during the summer.

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