DX Menzies deal a step closer

The boards of DX Group and John Menzies have announced that they have agreed revised terms for the proposed merger of DX and Menzies Distribution.

In a statement the companies said: “Under the revised terms of the Transaction, it is envisaged that DX would acquire Menzies Distribution for consideration, on a cash and debt free basis, comprising £40 million in cash and the issue of new DX ordinary shares (the “New DX Shares”) representing 65% of DX’s issued share capital as enlarged by the Transaction.”

The statement added: “The boards of DX and John Menzies believe that the combination would benefit the customers of DX and Menzies Distribution through the creation of a logistics and parcel carrier of enhanced scale and capability operating through a 24 hour logistics network across the UK and Ireland. Based on a joint assessment, the boards of DX and John Menzies estimate that the combination would generate cost synergies of around £10 million per annum.”

Bob Holt, Chairman of DX, and Dermot Smurfit, Chairman of John Menzies, commented: “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.”

As previously reported, one of the biggest shareholders in DX Group – Gatemore Capital Management – had been opposed to the proposed merger. However, Gatemore is now satisfied with the revised terms and, in its own statement, the investment group said: “The result of the revised terms is that DX Group shareholders would own, in aggregate, 35% of DX Group’s enlarged share capital, a significant increase from the 20% proposed in the initial terms.”

Liad Meidar, CIO and Managing Partner at Gatemore Capital Management, added: “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. 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.”

The proposed deal is subject to the approvals of both DX and John Menzies shareholders at their respective general meetings. The boards of DX and John Menzies said that they still expect that the deal will be completed during the summer – but caution that “discussions are ongoing and there can be no certainty that a transaction will occur.”
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