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John Menzies in talks to sell distribution unit to DX Group

Published 31/03/2017, 09:05
© Reuters.  John Menzies in talks to sell distribution unit to DX Group

(Reuters) - Scottish firm John Menzies (L:MNZS) said it was in talks to sell its distribution business to British mail delivery firm DX Group (L:DXDX), responding to calls by top investors to separate the unit from its airport services business.

DX Group proposed to pay 60 million pounds in cash and issue of new ordinary shares, which would represent 80 percent of DX's issued share capital after the deal closes, the companies said in a statement on Friday.

John Menzies's shares rose as much as 11.2 percent to 706 pence on the London Stock Exchange, touching their highest since November 2013.

The company has been under pressure to revamp its business as a string of warnings and departures of top executives drew criticism from three investors who advocated separating its aviation services and print media distribution units.

Activist investor Shareholder Value Management (SVM) took a 7 percent stake in Menzies last year and urged the company to break up its businesses saying they would be worth more if split.

John Menzies has been aiming to expand the aviation support business, which provides cargo and baggage handling and freight forwarding services and brings in most of its profits, as its once core newspaper and magazine distribution business continues its decline.

The merger deal will see Greg Michael, the managing director of John Menzies' distribution unit, take over as the chief executive of DX Group, and Paul McCourt, the unit's finance director, become DX Group's chief financial officer.

The companies said the deal would constitute a reverse takeover by DX and its ordinary shares are expected to be suspended from trading on London's Alternative Investment Market, effective Friday.

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The deal would generate cost synergies of 8 million-12 million pounds each year and complete in the summer, they added.

Rothschild is the financial adviser to John Menzies and Zeus Capital is advising DX Group.

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