DX-Menzies woo investors with revised deal terms

DX and John Menzies have revised the terms of the reverse takeover of DX by Menzies Distribution in an effort to win over disgruntled DX investors.

As a result DX shareholders would own 35 per cent of the enlarged business, instead of 20 per cent under the original deal.

The takeover had been opposed by some DX shareholders led by Gatemore Capital Management, which owns 21 per cent of DX’s shares. Gatemore is now backing the deal.

Managing partner Liad Meidar said:  “We were pleased to have been able to work productively with both the DX and Menzies boards to come to an outcome that significantly improves the terms of this deal for all shareholders.”

Under the term of the new deal:
DX would acquire Menzies Distribution for: £40m cash,
plus new DX shares representing 65 per cent of DX’s issued share capital.
DX shareholders would have 35 per cent of DX’s enlarged share capital.
John Menzies shareholders would have 60 per cent of DX’s enlarged share capital.
John Menzies Pension Scheme would own remaining five per cent.

By comparison, the terms of the old deal were:
DX would acquire Menzies Distribution for: £60m cash,
plus new DX shares representing 80 per cent of DX’s issued share capital.
DX shareholders would have 20 per cent of DX’s enlarged share capital.
John Menzies shareholders would have 75 per cent of DX’s enlarged share capital.
John Menzies Pension Scheme would own remaining five per cent.

In a statement setting out the revised terms, the two companies also said that the enlarged group would reinstate the payment of a regular dividend on completion of the transaction.

“On completion of the transaction, it is intended that the composition of the board of the enlarged group would comprise a new chairman and new independent non-executive directors.

Greg Michael, managing director of Menzies Distribution, would become chief executive of the enlarged group, while Menzies Distribution’s finance director Paul McCourt would become chief financial officer. Daljit Basi, currently finance director of DX, will become an executive director.

The statement said: “The boards of 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, while 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 deal will need to be approved by shareholders of both organisations before it can go ahead, but the expectation is that it will be completed this summer. However, the two companies warned: “Discussions are on-going and there can be no certainty that a transaction will occur.”

Bob Holt, chairman of DX, and Dermot Smurfit, chairman of John Menzies, 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.”

Setting out the reasons for backing the deal, Meider said: “The reduced debt load on the combined company, with a much-improved equity split, better reflects the inherent value in DX Group and will provide the company with a much healthier financial footing going forward. We continue to believe in the long-term value of DX Group as a stand-alone business due to its leading position in document exchange, secure delivery and IDW freight. 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.”