Suitor's case

NAS offer for Menzies a ‘compelling opportunity’

Menzies Aviation
Menzies’ board has rejected two approaches

National Aviation Services has today claimed that its proposed tie-up with John Menzies will provide a degree of protection as airlines look to contain costs with their airport service providers.

Shares in John Menzies soared by 43% after Menzies board yesterday revealed it had rejected the £468m ‘unsolicited’ offer, the second from Kuwait-based NAS.

But NAS today said it believes the proposed 510p per share offer – a 76% premium on the closing price on 2 February – represents a “compelling opportunity for shareholders to realise full value for their investment in cash.”

NAS made its first offer of 460p on 17 January and the improved offer on 2 February.

After an initial dip, shares in Menzies closed unchanged at 478p.

Group CEO Hassan El-Houry urged Menzies’ shareholders to back the offer as in the best interests of the company as the industry adjusts to contraction after the pandemic.

“In our view, the fundamentals of Menzies and of the industry as a whole are unlikely to change substantially, notwithstanding cost-cutting measures by Menzies,” he said.

“Let’s be clear: even as air travel recovers, airlines will look to contain costs with their airport service providers. 

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“NAS is a disciplined investor with a proven track record of growth, even throughout the COVID-19 pandemic that has largely decimated the industry. We are one of the fastest growing and most successful airport services companies in emerging markets, with an experienced leadership team.”

NAS has a presence in more than 55 airports across the Middle East, Africa and South Asia, and argues that it has a strong understanding of the dynamics of the aviation sector and the opportunities and challenges ahead as the sector recovers from the pandemic. 

It is part of the Agility Public Warehousing Company KSCP group , which, over the past 20 years, has been one of the largest investors in the logistics sector globally. Agility, listed on the Kuwait Stock Exchange, is a global player and a pioneer in emerging markets through diversified logistics activities and technological ventures.

NAS and Agility are strategic investors that take a financially disciplined approach to investments and acquisitions. In formulating its proposals, NAS and its advisers have considered publicly available information in detail, including Menzies’ performance before the pandemic, recent cost reduction measures, contract renewals and new business wins.

In addition, NAS and its advisers have taken into account the company’s debt levels, debt service obligations and ability to generate free cash flows and distribute profits to its shareholders, particularly in light of the investments required to remain competitive and grow the business.

NAS says the two companies share “highly complementary geographical footprints and product portfolios, with minimal overlap”.

It said it places importance on Menzies’ Scottish heritage, its enviable brand, and its long-standing operational excellence across the globe.

A combination with NAS, it says, would bring greater geographical diversification to Menzies, forging deeper relationships with the combined customer base. 

NAS believes that a combination of both businesses would equip the combined entity with the scale and resources necessary to serve a broader customer base globally, and capitalise on growth opportunities as the aviation industry emerges from the pandemic.

The company’s suitor has until 9 March to make a firm offer or walk away, but early indications show broad support for the board among major shareholders. They include the company’s largest and second largest investors: Mithaq with a 6.63% stake, and Sterling Active Fund, which has 6.6%. SVM Asset Management, the Edinburgh fund manager, holds 1.7% and also came out in support of the Menzies board.

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