It follows a profit warning by 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 about DX joining forces with Menzies Distribution, with the deal first announced in March.
• READ MORE: Menzies in talks to merge distribution arm with DX
But Edinburgh-based Menzies, which is due to report its half-year results tomorrow, said in a stock market announcement that, following additional due diligence on DX Group following a July trading update, it “became apparent” that any deal would require revised terms.
For that reason, despite “strong strategic and commercial benefits” that would arise from a tie-up, the deal has been “terminated”.
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. John Menzies has therefore terminated discussions with DX.”
The announcement also comes just over a month after City of London Police dropped plans for a probe into DX Group.
Menzies said it continues to believe there is 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.
“We strongly believe that, with leading positions in document exchange, secure delivery and IDW freight, DX is well positioned to thrive on a stand-alone basis.”