Financial investor Candover has agreed to buy private British mail firm DX Services for £348.7million and will merge it with a smaller mail operator to create a new B2B/B2C competitor to Royal
Mail, it was announced today. DX has been undergoing restructuring following a downturn in businessover the last year.DX Services, which is listed on the London Stock Exchange, announced that its board wasrecommending an offer by Mail Acqusitions Ltd (MAL), a Candover Partners company created for thistransaction. MAL has offered 415 pence in cash for each DX share, which values the existing issuedshare capital of DX Services at £348.7 million.
The offer represents a premium of 25.6% on the closing share price of 330.5 pence on 3 July2006, which was the last business day prior to the announcement by DX Services that it had receivedan approach which might lead to an offer for the company. It also represents an enterprise valuemultiple of 12.6 x DX Services’ pre-exceptional EBITDA for the 2005 calendar year and a multiple of20.6 x DX Services’ pre-exceptional earnings for that year. MAL has already received agreement forits offer from various shareholders representing 28.1% of share capital.
DX Services, established in 1975 as a private network document delivery service for thefinancial, legal and government sectors, claims to be Britain’s leading B2B mail delivery company.Alongside its core Document Exchange service for members, it offers mail and parcel deliveries andoperates Britain’s only alternative nationwide postal delivery network. In the year ending June 30,2005, it had turnover of £131.1 million and carried about 250 million items.
It was also announced in the DX statement that MAL plans to acquire another mail operator,Secure Mail Services, and merge the two postal companies into a new group. Secure Mail Services isa leading provider of secure mail services in the UK, providing next day delivery of time- andvalue-sensitive documents, predominantly to residential addresses. It had turnover of £45.6 millionin the year ending March 31, 2006 and about 20 million items.
By merging the B2B and B2C specialists, MAL would create the leading independent end-to-endservice operator in the UK postal market and an alternative to Royal Mail, DX said. The enlargedgroup has a combined pro-forma turnover of £175 million, approximately 1,840 employees and handlesover 270 million items of mail per annum. The new group could expand its range of services, offergreater network coverage and increase volumes.
John Maxwell, Chairman of DX Services, said: “This offer reflects a significant strategicpremium from a trade purchaser and enables the shareholders of DX Services to realise, in full, thefinancial potential of their investment in DX Services more rapidly than they would be able to doabsent the Offer. In addition, the plans Mail Acquisitions Limited has to combine the businesseswill, over time, create a stronger independent mail and parcels business, which will benefit thewider UK market.”
In view of the rapidly consolidating British mail and parcels market, the DX Services boarddecided that the transaction and merger with Secure Mail Services was a more attractive option thancontinuing the restructuring of DX Services and maintaining it as an independent business.
Marek Gumienny, a Managing Director of Candover Partners, said: “With the recommendation andbacking of DX Services’ management for the offer, we are looking forward to proceeding with thecombination of the DX Services and Secure Mail Services businesses to create a competitive force inthe UK mail delivery market.”
