Shareholders in parcels business DX Group have voiced their opposition to the firm’s reverse takeover by John Menzies, the Edinburgh-based logistics firm.
In a letter sent to the DX board, investment firm Gatemore Capital Management – which controls about 11 per cent of the shares – said the proposed deal “grossly undervalues DX and its potential to recover from the current nadir in profits”.
The proposed reverse merger grossly undervalues DXLiad Meidar
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Shareholders with a further combined 7 per cent interest in DX – Hargreave Hale, Downing and Lloyd Dunn – have thrown their weight behind its opposition to the tie-up, which was announced in March, and Gatemore managing partner Liad Meidar said: “We have spoken with a further 20 per cent of shareholders who have expressed discontent with this deal.”
The letter states: “It is critical that current DX investors, who have watched the share price drop 90 per cent and witnessed current management lose £200 million of value, realise the full benefit of a spin-off or turnaround of DX Freight.
“To consummate the current deal with Menzies and then address the problem with Freight afterwards will result in the current shareholders receiving only one-fifth of this benefit.”
It adds: “We demand that you either significantly improve the terms of the deal with Menzies or terminate discussions and allow the shares to resume trading.”
Shares in DX were suspended from trading on the Alternative Investment Market when the deal with Menzies was announced on 31 March.
It came after Menzies, which recently acquired US aviation services firm ASIG in a “transformational” deal worth $202m (£156m), faced investor pressure to consider a break-up of its business.
The baggage handler and newspaper distributor said there was “strong strategic logic” to pursue a deal with DX to create a “logistics and parcel carrier of enhanced scale and capability”, with the two firms predicting the combination could deliver annual cost savings of up to £12m.
Menzies’ corporate affairs director John Geddes told The Scotsman at the time that much of the synergies would come from property, vehicles and back-office operations, and he said there would be limited impact on the distribution unit’s 3,500-strong workforce.
He added: “Menzies Distribution is still 90 per cent a newspaper and magazine wholesale business, and DX don’t do any of that. We’ll still be going to 25,000 retailers every morning.”
Although both groups stressed that there was “no certainty” that the tie-up would take place, they are targeting completion of the deal during the summer, subject to shareholder approval.
If the tie-up went ahead, DX would pay £60m in cash for Menzies Distribution, along with the issue of new shares representing 80 per cent of its issued share capital. DX currently has a market value of about £17m.
The deal would see Menzies’ shareholders owning at least 75 per cent of DX, with a further 5 per cent held by its pension scheme.