Logistics and airport services firm John Menzies has ditched a proposed deal to sell its distribution arm to DX Group, it announced in an update this morning.
Menzies said it had carried out further due diligence off the back of a trading update last month, "as a result of which it became apparent to the John Menzies board that the combination would be required to be effected on revised terms".
The company said it didn't think it was possible to reach a deal that would be in the interests of its shareholders, so it brought discussions with DX to an end.
The two firms announced in March they were weighing up a possible merger of DX and Menzies' distribution division. In June they announced a revised proposal for the deal which would mean DX taking over Menzies Distribution for £40m in cash, along with new shares worth 65 per cent of the firm.
In its recent trading update, DX announced a switch-up of its leadership, with both the chief executive and finance director leaving the company. The company also said full-year earnings growth will be flat.
The proposed deal had already come under pressure after it was announced in June that the police were investigating a division of the mail and logistics firm, which was then dropped in July.
It also faced the possibility of being derailed after activist investor Gatemore Capital Management upped its stake in DX. Before the revised deal was announced in June, Gatemore had said the initial proposal dramatically undervalued DX shares and would result in stakeholders' shares being diluted.
Gatemore managing partner and chief investment officer Liad Meidar, said today his firm was "excited about the prospects for DX as a stand-alone company, especially under the leadership of the new board".
Meanwhile, Menzies said it still thinks there is "strategic merit" in separating its aviation and distribution units into independent businesses.
The company made the announcement ahead of its interim results which will be announced tomorrow.
Bob Holt, chairman of DX, said "it has become clear that we would not be able to agree terms that would be acceptable to our shareholders and since we have a strong alternative business transformation plan in place, we have decided that it is the best interests of our shareholders for us to pursue this course".
As we were unable to agree suitable terms with John Menzies, we believe a stand-alone strategy is the right course for our shareholders and we are on the front foot with plans for business transformation and recovery.