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On 9 February 2022, John Menzies plc that it had rejected two unsolicited preliminary takeover proposals from Kuwait-based rival National Aviation Services (NAS), a subsidiary of Agility Public Warehousing Co, having concluded that the terms of the proposal ‘fundamentally undervalues Menzies and its future prospects’. 

NAS’ possible offer to acquire the entire issued and to be issued share capital of Menzies at £5.10 per share valued the company at roughly £469m. However, despite NAS’ insistence that its second proposal represents a 76% premium to Menzies' closing share price of £2.90 per share on 2 February 2022, the board unanimously rejected the possible offer, and an earlier proposal of £4.60 per share. Menzies labelled the unsolicited offer as ‘highly opportunistic’ and stated it greatly undervalued the FTSE 250 aviation services provider.

In a , Hassan El-Houry, CEO of NAS commented:

‘We have made an attractive offer that we urge Menzies' shareholders to consider carefully. Our offer represents a 76% premium over Menzies' share price just over a week ago. In our view, the fundamentals of Menzies and of the industry as a whole are unlikely to change substantially, notwithstanding cost-cutting measures by Menzies. Let's be clear: even as air travel recovers, airlines will look to contain costs with their airport service providers. NAS is a disciplined investor with a proven track record of growth, even throughout the COVID-19 pandemic that has largely decimated the industry. We are one of the fastest growing and most successful airport services companies in emerging markets, with an experienced leadership team.’

John Menzies, an international aviation services provider operating in over 200 airports in 37 countries, suffered heavy losses in 2020 after the pandemic led to a collapse in global aviation. It has since reshaped its business and implemented a £25m cost-cutting drive in an effort to reach pre-pandemic trading levels. The Menzies’ board is committed to continuing the execution of its strategy and believes that NAS’ opportunistic proposals have been strategically made before the full impact of the cost-cutting drive has been reflected in Menzies valuation and underlying volumes have not yet had the opportunity to return to pre-pandemic levels.

Since the announcement of the possible takeover proposal, a back and forth between the companies has ensued with NAS Menzies’ board and management team of failing to ‘engage with NAS or share any information to corroborate their differing views on the company and industry, and therefore valuation’, on 14 February 2022. NAS has maintained that its cash offer at a price of £5.10 per share ‘represents a full and fair value for Menzies and a compelling opportunity for Menzies shareholders to realise their investment in cash in the near-term’, suggesting that the Kuwait-based rival would not be raising its offer any time soon.

However, a defiant John Menzies has continued to reiterate its of the offer as it believes it undervalues the company as it fails to take account of the execution of Menzies’ strategy and the significant potential value creation. Philipp Joeinig, Chairman and CEO of John Menzies plc, :

‘Menzies continues to make good progress with strong performance across a number of service lines, which together with productivity gains, saw the Group to finish last year strongly. This strong performance and momentum in 2021 has continued in 2022 with further contract wins and renewals alongside the continued recovery of global flight volumes. The Board remains fully confident in the recovery and outlook for the global aviation services industry as it returns to pre-pandemic trading levels and benefits from long term structural growth drivers. 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.’

Edinburgh-based Menzies will announce its annual financial results on 8 March 2022, one day before the ‘put up or shut up’ (PUSU) deadline in accordance with Rule 2.6(a) of the Takeover Code, by which NAS is required to announce whether or not it has a firm intention to make an offer.

The events over the past week have culminated in Agility Strategies Holding Limited, an entity under common control with and acting in concert with NAS, to acquire a 13.2% stake in Menzies at £6.05 per share on 17 February 2022. This is a significant premium on its previous proposal of £5.10 per share and a 109% premium to Menzies' closing share price on 2 February 2022, despite insisting just three days prior, that its previous proposal represented a full and fair value for Menzies. Following the share purchase, NAS is now the single largest shareholder of Menzies and according to UK takeover rules, any future proposals for Menzies made by NAS must be higher than £6.05 per share. Investors reacted positively to the news sending Menzies’ share price soaring 25% to £5.84, surpassing their pre-pandemic levels. NAS CEO, Hassan El-Houry, noted:

‘The acquisition of this significant stake demonstrates our seriousness and belief that a combination of Menzies and NAS offers a compelling opportunity to all stakeholders. If we were to make an offer at 605 pence per share, it would represent a premium of 109% to Menzies' share price just over two weeks ago. Once again we urge the Menzies board to engage with us so that we can put our compelling and deliverable offer to shareholders and secure Menzies' future in a highly uncertain environment.’

The PUSU deadline is on 9 March 2022. Market Tracker will continue to monitor this transaction as it develops.