John Menzies scraps planned £40m DX Group merger

image source, Menzies Distribution

John Menzies has walked away from a proposed £40m deal to sell its distribution arm to parcel delivery and logistics firm DX Group.

The move follows a trading update on 14 July in which DX cautioned over "challenging" trading conditions.

The companies had been in talks for several months over a possible merger.

But on Monday Menzies said that, after further due diligence on DX Group, it "became apparent" any deal would require revised terms.

In a stock market announcement, it said that despite further discussions with DX following its July trading update, the board "does not believe it is currently possible to agree a revised set of terms with DX for the combination which would be in the interests of John Menzies shareholders".

It added: "John Menzies has therefore terminated discussions with DX."

The Edinburgh-based company said it continued to believe there was "strategic merit" in separating its aviation and distribution divisions into two independent businesses at the "appropriate time".

image source, DX Group

In June, the two companies agreed revised terms following opposition from an activist investor to the original deal struck in March.

DX shareholder Gatemore Capital Management had threatened to block the merger unless terms were "markedly improved".

In its trading update last month, DX announced an overhaul of its business, including a number of board changes, following a "wide-ranging review" of its operations.

On Monday, it stated: "The board of DX announces that, after due consideration, discussions with John Menzies plc regarding the potential combination of DX and John Menzies' distribution division have been terminated.

"While the respective boards believed that the proposed combination had strong strategic logic for all stakeholders, the DX Board has been unable to agree suitable terms.

"As a result, it believes it to be in the best interests of DX shareholders to proceed with business transformation on a stand-alone basis.

"This approach has the support of both DX's major shareholder and its bankers, with discussions on new financing options for DX already under way."

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