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Discussions on the proposed acquisition of Menzies Distribution by DX Group have broken down, it was revealed today.
A trading update led Menzies to seek revised terms on the deal, which could not be met.
Mooted in March, DX Group announced in June it was to acquire Menzies Distribution on a cash and debt-free basis for £40m, plus 65% of its issued share capital as enlarged by the merger.
However, after DX released a trading update last month, the Menzies board undertook further due diligence on the UK delivery firm, which led it to believe the deal could not be completed on the original terms.
Attempts to reach a revised settlement apparently failed, leading the Menzies board to announce a termination of discussions this morning.
In a statement, Menzies said: “Notwithstanding the strong benefits which would arise from [a merger] … the board does not believe it is currently possible to agree a revised set of terms. John Menzies has therefore terminated discussions with DX.”
When contacted by The Loadstar, Menzies declined to provide further detail on why talks had been ended other than to say the decision was “fairly terminal”.
DX chairman Bob Holt said that, while talks with Menzies had been “constructive” – the proposed merger proving “potentially highly attractive” – it was clear terms could not be agreed.
“As we were unable to agree terms, we believe a standalone strategy is the right course, and we are on the front foot with plans for business transformation and recovery,” added Mr Holt.
“Our major shareholder and bankers are supportive of the plans for the business on a standalone basis and we have been exploring new financing options.”
Furthermore, Mr Holt said, DX was in advanced discussions with Ron Series to take the role of chairman and with Paul Goodson, Russell Black and Lloyd Dunn as non-executive directors.
The decision to end talks with Menzies was met with warm applause from DX’s largest shareholder, Gatemore Capital, which had been sceptical of the union from the start.
The activist investor, however, lightened its stance and okayed the merger plan in June after it was agreed that Petar Cvetkovic would be replaced as chief executive.
Today, chief investment officer and managing partner of Gatemore Liad Meidar said he was excited about the prospects for DX as a “standalone” company, “especially” under leadership of the new board.
“Each new director brings significant sector experience: Ron Series and Lloyd Dunn can be credited with the remarkable turnaround of Tuffnells, DX’s main competitor in freight,” said Mr Meidar.
“We appreciate Bob Holt’s stewardship of the company throughout a challenging period and believe that the board arrived at the right conclusion with the Menzies transaction.”
The changes will be led by Mr Holt, after which he intends to retire from the company, and DX said there would be a further announcement on board changes “in due course”.
Mr Leidar added: “We stand firmly behind the new team and are confident they will achieve tremendous success at DX.”