DX (Group) plc (LON:DX) following the initial announcement at the end of March (31st) that DX was in discussion on a potential combination with the Distribution division of John Menzies, both companies have announced revised terms for the deal. Importantly, Gatemore, a shareholder with a 21.3% holding in DX, has undertaken an irrevocable undertaking to vote in favour of the proposed deal under the new terms. The revised transaction would see DX acquire Menzies Distribution for £40m (previously £60m) in cash and the issue of new DX ordinary shares representing 65% (previously 80%) of DX’s issued share capital as enlarged by the transaction. The boards have firmed up the quantum of the potential cost synergies to £10.0m per annum. At the time of the initial announcement, guidance was for between £8.0 and £12.0m annually. Discussions are on-going and the shares remain suspended.
* Announcement indicates movement in discussions on the acquisition of Menzies distribution – This morning’s announcement shows talks have progressed in two ways. Firstly, the cost synergy estimate from the combination of the two businesses has been firmed up at c. £10.0m, from an initial range of £8.0 – £12.0m, and with Gatemore agreeing to vote in favour of the new terms. We would caveat that discussions are on-going and there remains no certainty in a positive conclusion.
* The new terms – The proposed transaction would see DX acquire Menzies Distribution for a consideration of £40m, £20m less than the £60m proposed under the original announcement in March. Shares issued by DX will represent 65% of DX’s issued share capital as enlarged by the transaction. This is against the 80% in the initial terms. As before, the cash element would be satisfied by new borrowings by the Enlarged Group.
* New equity split – Post completion, DX (Group) Plc shareholders will own 35% of the enlarged Group, against 20% previously. Menzies’ shareholders would own 60%, down from 75%. The new entity will still have to take 17% of the John Menzies’ defined benefit scheme, the scheme’s trustees will own 5% of the enlarged Group, as outlined in the March announcement.