Gatemore: DX/Menzies tie-up “not in the best interests of shareholders”

Gatemore Capital Management, an 11% shareholder in the DX Group, has argued the proposed merger between DX and John Menzies’ Distribution division “is not in the best interest of shareholders”. The boards of the DX and John Menzies announced their proposed merger plans this morning (31 March) – and now Gatemore has sent the following statement to Post&Parcel:

“On the surface, the proposed combination of DX Group and John Menzies’ Distribution division looks like a bad deal for DX shareholders and a face-saving exercise for the DX board. We are highly suspicious about the timing of the announcement and the board’s motivations around it. They have already destroyed 90% of DX’s market value. Now they are further compromising shareholders by announcing a deal with so many loose ends and suspending trading on the shares indefinitely. It seems like an egregious case of the board front-running the EGM and force-feeding a deal which is not in the best interest of shareholders.

“Furthermore, the timing of this announcement seems like an attempt to distract from terrible operating results. The systemic issues that we previously identified with the Company’s OneDX integration programme remain. While DX recently announced a new business win, it falls under its lower margin logistics unit. It will take many such wins to make up lost ground in freight and document exchange.

“The announcements today make it clearer than ever that it is time for a new board to take over.  The four nominees at the EGM have some of the best track records in the sector. We are optimistic that this exceptional team will properly assess all strategic alternatives while implementing a credible long-term plan to turn around the business and restore it to a higher level of profitability.”

As previously reported, Gatemore last week requested DX to convene an EGM and also called on the Chairman, Bob Holt, and the Non-Executive Director, Paul Murray, to step down. Gatemore submitted its own proposals for a new board.