Candover buys DX to merge it with SMS
DX Services, the mail business, is to be bought by Candover Partners, the private equity firm, for Pounds 348.7m.
The offer of 415p a share in cash represents a 26 per cent premium to the closing share price of 330 1/2p on July 3, the day before the company announced it had received an approach from an unidentified party.
Candover’s acquisition represents a direct challenge to the Royal Mail Group as the private equity firm plans to merge DX with Secure Mail Services, a postal company that delivers time-sensitive documents.
Candover is buying SMS, which delivers cheque books and credit cards to consumers, from Baring Private Equity for an undisclosed sum.
“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,” Candover said.
DX delivers about 250m items a year mainly to business customers while Secure Mail delivers to about 18m residential addresses. The enlarged group will have a combined turnover of Pounds 175m and 1,840 employees.
James Greenbury, SMS chief executive, will take over as chief executive of the enlarged business, leaving Paul Kehoe, DX chief executive, who joined the group last year, to run the DX arm.
Mr Kehoe said: “There is great logic to this deal as DX is business to business and SMS is business to consumer. James got there first (as chief executive of the new group) and I am happy to support him in the short-to-medium term. But I am taking no stake in the new business.”
One analyst said: “On first glance its a generous price and a reasonable premium but a few people are surprised at the timing.”
The private equity firm said it was paying more than 20 times DX’s pre-exceptional earnings of Pounds 16.9m in 2005.
Last January, DX shares fell 17 per cent after it issued a profit warning on the back of a slowdown in the property sector and poor market conditions.
PwC and Lazard advised Candover while UBS and Numis advised DX Services. DX shares rose by 22 1/2p to 414p.
