Recommended offer for DX Services plc by Mail Acquisitions Ltd (MAL)

RECOMMENDED OFFER FOR DX SERVICES PLC ("DX SERVICES" OR THE "COMPANY") BY
MAIL ACQUISITIONS LIMITED ("MAL")
Summary of Offer
• The Boards of DX Services and MAL are pleased to announce the terms of a recommended cash
offer by MAL to acquire the whole of the issued and to be issued share capital of DX Services.
• MAL is an English company, newly incorporated for the purposes of making the Offer, and is
ultimately controlled by Candover Partners.
• The Offer will be 415 pence in cash for each DX Share and values the existing issued share
capital of DX Services at £348.7 million.
• The Offer represents:
− a premium of 25.6 per cent. to the Closing Price of 330.5 pence per DX Share on 3 July 2006,
being the last Business Day prior to the announcement by DX Services that it had received an
approach which might lead to an offer for the Company;
− a premium of 28.5 per cent. to the average Closing Price of 323.0 pence per DX Share in the
period from 7 March 2006 (the date the Company announced its interim results for the 6
month period to 31 December 2005) to 3 July 2006;
− a premium of 35.4 per cent. to the Closing Price of 306.5 pence per DX Share on 7 March
2006 (the date the Company announced its interim results for the 6 month period to 31
December 2005);
− an enterprise value multiple of 12.6 x DX Services' pre-exceptional earnings before interest,
tax, depreciation and amortisation (EBITDA) for the twelve month period ended 31 December
2005; and
− a multiple of 20.6 x DX Services' pre-exceptional earnings for the twelve month period ended
31 December 2005.
• The DX Directors, who have been so advised by UBS Investment Bank and Numis, consider the
terms of the Offer to be fair and reasonable. In providing advice to the DX Directors, UBS and
Numis have taken into account the commercial assessments of the DX Directors. UBS has a
corporate advisory relationship with Candover and, as a consequence, is not with respect to the
Offer an independent adviser in accordance with Rule 3 of the City Code.
• The DX Directors intend unanimously to recommend the Offer and have irrevocably undertaken to
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accept, or to take all steps within their power to procure the acceptance of, the Offer in respect of
their own beneficial holdings. Those holdings amount, in aggregate, to 72,443 DX Shares,
representing 0.1 per cent. of the existing issued share capital of the Company.
• In addition, MAL has received irrevocable undertakings from certain other DX Shareholders to
accept the Offer in respect of a total of 23,511,343 DX Shares, representing, in aggregate, 28.0
per cent. of DX Services' existing issued share capital.
• MAL has therefore received irrevocable undertakings to accept the Offer in respect of 23,583,786
DX Shares representing, in aggregate, 28.1 per cent. of DX Services' existing issued share
capital.
Acquisition of Secure Mail Services and information on the enlarged DX Services/Secure Mail
Services group
• Conditional upon the Offer being declared unconditional in all respects, the MAL Group has also
agreed to acquire the entire issued share capital of Secure Mail Services.
• Secure Mail Services is a leading provider of secure mail services in the UK, providing next day
delivery of time- and value-sensitive documents, predominantly to residential addresses.
• MAL believes that there is compelling strategic logic in bringing together DX Services, providing
next day, early morning business-to-business mail delivery services, and Secure Mail Services,
providing business-to-consumer secure mail services, to create the leading independent end-toend
service operator in the UK postal market.
• MAL believes that the combination of DX Services and Secure Mail Services will enable further
improvement to the range and quality of services offered to customers, provide more extensive
coverage through an expanded delivery network, generate increased volumes for key business
partners and suppliers and create new opportunities for employees.
• In addition, in the wake of recent postal industry deregulation, the Enlarged Group will be well
positioned as customers consider a move to use alternatives to Royal Mail.
• The Enlarged Group has a combined pro-forma turnover of £175 million, approximately 1,840
employees and handles over 270 million items of mail per annum.
Information on Candover
• Funding for equity investments in buyouts organised by Candover Partners is provided from two
sources: from Candover Investments, an investment trust listed on the Official List with a market
capitalisation of €521 million, and from third party funds raised and managed by Candover
Partners. Candover Partners is a wholly-owned subsidiary of Candover Investments and is
currently investing the Candover 2005 Fund, a €3.5 billion fund which it raised in November 2005.
Commenting on the Offer, John Maxwell, Chairman of DX Services said:
"This offer reflects a significant strategic premium from a trade purchaser and enables the
shareholders of DX Services to realise, in full, the financial potential of their investment in DX Services
more rapidly than they would be able to do absent the Offer. In addition, the plans Mail Acquisitions
Limited has to combine the businesses will, over time, create a stronger independent mail and parcels
business, which will benefit the wider UK market".
Commenting on the Offer, Marek Gumienny, a Managing Director of Candover Partners said:
"Since we first approached the DX Services Board in April, we have worked assiduously to complete
our due diligence, greatly helped by the Company's co-operation. With the recommendation and
backing of DX Services’ management for the Offer, we are looking forward to proceeding with the
combination of the DX Services and Secure Mail Services businesses to create a competitive force in
the UK mail delivery market".
There will be a conference call for analysts and investors at 9.00 am on Thursday, 6 July 2006, which
can be accessed by dialling +44 (0)1452 541 076. The call will be recorded and available for ten days
following the call on +44 (0)1452 550 000, access number 2642191#.
This summary should be read in conjunction with the full text of the following announcement and the
Appendices. Appendix I sets out the conditions and principal further terms of the Offer. Appendix II
contains source notes relating to certain information contained in this announcement. Certain terms
used in this announcement (including the summary) are defined in Appendix III to this announcement.
Enquiries:
Candover
Marek Gumienny +44 (0)20 7489 9848
PricewaterhouseCoopers (advisers to MAL and Candover Partners)
Simon Boadle +44 (0)20 7583 5000
Simon Hawes +44 (0)20 7583 5000
Coolin Desai +44 (0)20 7583 5000
Lazard (advisers to Candover Partners)
Peter Kiernan +44 (0)20 7187 2000
Samuel Bertrand +44 (0)20 7187 2000
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Panmure Gordon (broker to Candover Partners)
Tim Linacre +44 (0)20 7459 3600
Richard Gray +44 (0)20 7459 3600
Tulchan (PR adviser to Candover Partners)
Julie Foster +44 (0)20 7353 4200
Peter Hewer +44 (0)20 7353 4200
DX Services
Paul Kehoe +44 (0)1753 630 630
UBS Investment Bank (financial adviser and broker to DX Services)
John Woolland +44 (0)20 7567 8000
Peter Luck +44 (0)20 7567 8000
Numis (Rule 3 adviser to DX Services)
Michael Meade +44 (0)20 7776 1500
Brunswick (PR adviser to DX Services)
Rupert Young +44 (0)20 7404 5959