Menzies issues further takeover rebuff to NAS
15 / 02 / 2022
By Roger Hailey
Menzies has issued a further takeover rebuff to Agility subsidiary National Aviation Services (NAS), which last week launched a 510 pence per share bid for the Scotland-based wholesale airfreight and airport ground handling group.
The board of Menzies said on February 15 that it has engaged with its shareholders following its announcement of the NAS proposal on February 9 which it subsequently rejected. This rejection prompted NAS to respond that it’s offer was “compelling.
A Menzies statement said: “As previously announced, the Board of Menzies has unanimously rejected the NAS Proposal, having concluded that it is opportunistic, conditional and that the terms fundamentally undervalue Menzies and its future prospects.”
The war of words between the two companies intensified on February 14, when NAS chief executive Hassan El-Houry said in a statement: “We made a compelling offer that represents a 76% premium to the company’s share price less than two weeks ago.
“Our view is that Menzies has a strong brand legacy with a geographic presence that is complementary to NAS, but as operators ourselves, we also see a sector facing a number of challenges and a company that lacks the balance sheet to thrive. Unfortunately, Menzies’ management has not meaningfully engaged in a way that changes our view.”
El-Houry said that NAS and Agility Public Warehousing Company group (Agility) are “strategic operators with deep expertise in airport services and global logistics that take a financially disciplined approach to investments and acquisitions”.
Kuwait-headquartered NAS added that the improved possible cash offer of 510 pence per share for Menzies reflects the assumptions that Menzies’ revenue recovers to pre-pandemic levels by early 2023 and that Menzies’ margin forecasts incorporate the full benefit of the cost savings publicly disclosed by management.
It also assumes that the material government support received under Covid-19 schemes in the UK, US and other key markets will be replaced by sustainable cash flows going forward.
Said El-Houry: “As a successful strategic operator in the aviation services sector, NAS has a clear and detailed view on the challenges and opportunities present in the sector as it recovers from the pandemic and has framed its analysis on that basis.”
In its response on February 15, the Menzies board stated why it continued to reject the NAS offer: “When adjusted for permanent cost savings of £25m that the management team of Menzies has already delivered, the NAS Proposal implies a (pre-IFRS16) EV/EBITDA multiple of 6.4x, which is significantly lower than achieved in comparable transactions over the last decade in our sector for other assets of Menzies’ size and standing.”
The Menzies board continued: “In addition, the NAS Proposal fails to take account of the execution of Menzies’ strategy and the significant potential value creation driven by:
- The full impact of management actions not yet reflected in Menzies’ valuation;
- The return of underlying volumes to pre-pandemic levels with Menzies well positioned to benefit as a global player in a market with proven structural growth; and
- The pipeline of higher margin opportunities that we believe will generate approximately £80m of net new annualised revenue from commercial opportunities and approximately £150-200m of new revenue over the short to medium term from several business development opportunities.”
The Menzies statement continued: “The Board believes the strong portfolio mix, positioning of Menzies and the ongoing execution of Menzies’ strategy will create significant value for shareholders in the near and medium term. The Board will consider the best interests of Menzies’ shareholders and all actions to maximise shareholder value.
“There can be no certainty that any firm offer for Menzies will be made nor as to the terms on which any firm offer may be made. A further announcement will be made in due course. Shareholders are urged to take no action at this time.”
John Menzies plc was first listed on the London Stock exchange in 1962 and is the holding company of Menzies Aviation, the global ground services provider and Air Menzies International, the global freight forwarder.