* DX reverse takeover proposal offers 60 mln stg cash, new
* Menzies' answers investor call to separate distribution,
* DX investor criticises proposal, Menzies investor supports
* DX shares suspended, Menzies shares rise 11 pct
(Adds comments from DX shareholder, details, updates share
By Esha Vaish and Maiya Keidan
March 31 John Menzies said it was in
talks to sell its distribution arm in a reverse takeover deal
with UK mail delivery firm DX Group, which DX's top
shareholder said was a "bad" proposal.
DX Group warned on profit last month citing challenges in
the courier market and margin pressure in its freight unit, and
activist investor Gatemore Capital Management argued a reverse
takeover of Menzies would inflate debt without fixing DX's
Firms are vying for size in UK's overcrowded and competitive
parcels market, where DHL-owner Deutsche Post has
bulked up by buying UK Mail and Amazon has
started its own deliveries.
DX forecast cost synergies of 8 million-12 million pounds
each year from the Menzies deal, but Gatemore, which has an 11
percent stake in DX, said its failure to deliver against its
2012 Neightfreight acquisition left it sceptical.
"This is trying to tack on a complementary business. What DX
needs to do is improve its service quality and operations,"
Gatemore Chief Investment Officer Liad Meidar told Reuters.
"It seems like an egregious case of the board...
force-feeding a deal which is not in the best interest of
shareholders... I think there are other(s) who will view this as
Under the proposal, DX would pay about 60 million pounds
($75 million) cash and issue new shares to Menzies equalling 80
percent of DX's share capital, the companies said, without
disclosing the deal value.
A firm offer would require support from shareholders holding
at least 75 percent of DX's issued share capital as per UK
DX's shares, which have lost about 90 percent since it
listed, were suspended from trading on London's Alternative
Investment Market on Friday.
Menzies' shares climbed 11 percent to 706 pence. Three of
its top investors had called for the separation of its aviation
and distribution units, following warnings over profit and
revenue and executive departures.
Executive Director John Geddes said the deal would boost its
distribution unit's e-commerce delivery presence.
"We felt this was a step change for the business overnight
and creates a very strong, truly national logistics player," he
If the deal closes, Menzies' distribution managing director
Greg Michael will become DX chief executive and distribution
finance director Paul McCourt will become DX chief financial
Shareholder Value Management (SVM), which was one of
Menzies' investors pushing for a business split after taking a 7
percent stake last year, told Reuters it was happy with the
structure of the deal.
SVM had already pressured Menzies into hiring packaging
industry tycoon Dermot Smurfit as its new chairman.
"Dermot's actions as chairman over his short tenure have
been exemplary," SVM Director Gianluca Ferrari said, describing
the plan as an "important milestone" for Menzies.
($1 = 0.8021 pounds)
(Reporting by Esha Vaish and Rahul B in Bengaluru, Maiya Keidan
in London; Editing by Amrutha Gayathri and Elaine Hardcastle)