DX investor Gatemore backs revised John Menzies deal

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Menzies Distribution staffImage source, Menzies Distribution

An activist investor has ended its opposition to a proposed merger between mail delivery firm DX Group and the distribution arm of John Menzies, after the companies agreed revised terms.

DX shareholder Gatemore Capital Management had threatened to block the original deal unless it was "markedly improved".

Under the new deal, DX will buy Menzies Distribution for £40m in cash.

It will also issue new ordinary shares representing 65% of the enlarged firm.

The previous deal proposed DX pay £60m in cash plus new shares, with shareholders in Edinburgh-based Menzies ultimately owning at least 75% of DX.

'Strong strategic logic'

In a joint statement on Monday, the companies said: "The boards of DX and John Menzies continue to believe that the combination has strong strategic logic for all stakeholders and that the transaction, on the agreed revised terms, represents an opportunity to deliver significant value to both companies' shareholders.

"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 have estimated that the reverse takeover would generate cost benefits of about £10m a year.

'Healthier financial footing'

Gatemore 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.

"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 merger is subject to approval by both DX and John Menzies shareholders.

The companies said they still expected the transaction to be completed during the summer.

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