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Progress on merger

Smurfit confident of completing DX deal

John Menzies chairman Dermot Smurfit says the board is confident of completing a deal with DX parcels group to create a larger logistics company.

DX is buying Menzies Distribution in a reverse takeover that will see Menzies take control of the combined entity.

A group of shareholders in DX oppose the deal and believe they are gathering enough support to stop it.

Activist investor Gatemore Capital Management is leading opposition to the £60m tie-up.

Gatemore has an 11% stake in DX and other shareholders representing a further 7% also oppose the deal which they claim undervalues the company’s prospects.

The proposed tie-up was unveiled in March to create a 24-hour UK-wide logistics network.

In a statement ahead of today’s annual meeting of Menzies shareholders in Edinburgh, the company insisted that progress was being made on the deal and also on the integration of recently-acquired ASIG.

“Our proposed deal to combine Menzies Distribution with DX (Group) plc continues to move forward positively. We remain confident of a conclusion to the deal during the summer and will update shareholders at the appropriate time,” the company said.

Mr Smurfit added: “I am very pleased at the progress made so far this year. The integration of ASIG is progressing well and I am confident we will be able to deliver on a deal to combine the businesses of DX (Group) plc and Menzies Distribution.

“Our Aviation business continues to trade strongly. The opportunities that exist to cross sell our new product lines and also to expand into new markets are very exciting and your Board looks to the future with increasing confidence.”

In a trading update for the first four months of the year, the group said it has had a positive start to the year and is continuing to make good progress against its strategic objectives, though sales were lower, largely because of a larger than expected decline in the magazine market.

“At Menzies Aviation, the underlying business is performing well with solid revenue growth in the period of 12% on a constant currency basis,” it said.

“Contract gain momentum has continued with notable wins across each region. In the UK, contracts have been secured with Cathay Pacific and Jet2 and in the Americas with Virgin America and Frontier. In addition our joint venture with Oman Air is due to start early in the second half of the year at nine airports across Oman.”

The acquisition of ASIG was completed on 1 February and the company trading is in line with its expectations.

“Integration plans are on track, the anticipated synergies are being realised and overall we are pleased with the business we have acquired,” said the statement.

“Customer reaction to the acquisition has been positive and the pipeline of opportunities remains strong. Our current focus is on the seamless integration of the existing business into Menzies systems and processes, which will provide a strong platform to build the enlarged business.

“Menzies Distribution is performing in line with expectations. Overall sales decline of 3.1%, against the same four month period last year, is broadly in line with our forecasts, although the rate of decline within the magazine market is sharper than expected.

Within our retail logistics arm we secured a contract with NHS Scotland, collecting stock from their National Distribution Centre in Larkhall and distributing to hospitals across all of the Regional Health Boards throughout Scotland.

“This contract commenced successfully on 1 April 2017 and builds on the national WH Smith contract which commenced in 2016. Our entry into this market is being viewed favourably and the commercial team are following a number of opportunities.”

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