Global advertising group M&C Saatchi has rejected a new takeover offer from its deputy chair, software entrepreneur and major shareholder Vin Murri, to form what she calls a "digitally focussed creative" group.
Independent directors at M&C Saatchi say a revised proposal -- valuing the company at 270 million pounds -- and an alternate proposal “significantly undervalue” the company and its prospects.
The first proposal was a merger with AdvancedAdvT Limited, established by Murri as a London Stock Exchange-listed "acquisition vehicle".
This was rejected. The latest approach puts up two deals, with a 20% improvement on the first: an all-share offer valuing M&C Saatchi’s shares at 220 pence and an alternative that includes some cash.
In both scenarios, current M&C Saatchi shareholders would end up with the majority of the new company.
The deal would see the current CEO of M&C Saatchi, Moray MacLennan, keep his position.
The board of AdvancedAdvT believes this is a “truly beneficial” merger:
“The company believes that the enlarged group would have the opportunity to create significant value for its then shareholders and that a merger would create an opportunity to build a data, analytics and digitally focussed creative marketing business with a strong balance sheet and additional management with expertise in transforming businesses at pace and execute on complementary M&A.”
However, the independent directors say the proposed exchange of shares under the revised proposal would dilute and transfer value from the company's shareholders to AdvT's shareholders.
“The revised proposal makes reference to ‘transformational digital-led M&A’’, yet AdvT has provided no further details around the nature of potential targets, the status of any discussions or the terms on which any such acquisition would be made, and so the independent directors have been unable to assess the benefit or execution risk of any such proposed strategy.
“Such an M&A strategy offers no guarantee of success, and comes with heightened risk to the Company and its clients, culture and employees. ·
“The independent directors believe that the proposed transaction with AdvT would cause disruption to the Company and its ability to continue to retain key employees.”
The independent directors say they are highly confident of M&C Saatchi 's current strategy as an independent company:
In a trading update, M&C Saatchi now believes full year 2021 headline profit before tax will be materially ahead of its previous expectations.
“The strong trading performance has further strengthened the group's cash position, providing the balance sheet flexibility to settle put option liabilities as they fall due in 2022, resume the payment of dividends and to continue the delivery of the group's growth strategy,” says the company.
“These results demonstrate the success of the strategy outlined at the Capital Markets Day in January 2021 - connecting specialist expertise; further embedding digital, data and tech to fuel growth; and driving efficiencies through simplification.
“Momentum has continued into the start of 2022 with major client wins.”
M&C Saatchi, founded in 1995 by brothers Maurice and Charles Saatchi, reported a better than expected first half year with profits ahead of pre-pandemic levels.
In September, the company reported headline profit before tax of £7.1 million, 209% ahead of the same half year in 2019.
Like-for-like net revenue was up 21% for ths six months to June. Gross revenue was £171.2 million, up 14.7%, and net revenue £118.1million, up 14.2%.
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