Shares in global aviation services provider John Menzies (MNZS) flew 35% higher to 450p after the firm rejected a second bid from Kuwait-based NAS (National Aviation Services), claiming it ‘fundamentally undervalues Menzies and its future prospects’.
The revised bid from NAS, at 510p per share in cash, values the company at just under £470 million or a premium of 52% to its market value at yesterday’s closing price.
The suitor had previously pitched an offer at 460p, although this is the first time Menzies has revealed that information.
OPPORTUNISTIC
The board of Menzies insists NAS’s bid is ‘highly opportunistic and comes at a time when the full impact of management actions is not yet reflected in Menzies’ valuation and underlying volumes have yet to return to pre-pandemic levels’.
As well as arguing the £470 million valuation doesn’t reflect the hard work the firm has put in reshaping the business due to the pandemic, the board claims it ‘fails to reflect Menzies strong growth prospects and attractive industry outlook’ given the group’s market position and the prospect of a recovery in flight and freight volumes.
‘The board has unanimously rejected this unsolicited and highly opportunistic proposal, which we believe does not reflect Menzies’ true intrinsic business worth or its prospects’, said chief executive Philipp Joeinig.
UNDERVALUED?
Menzies says it has been ‘rebuilt for the future’ and expects to deliver strong revenue growth in the short and medium term, ‘generating significant value creation on a standalone basis’.
As a result, it believes NAS’s offer of 510p in cash per share ‘does not fully provide shareholders with the full value potential available in Menzies’.
However, the firm’s refusal to even engage with NAS and its insistence that the business is worth more than the £470 million the Kuwait firm is prepared to offer risks doing shareholders a disservice.
There are plenty of examples of UK firms which have rejected bids only to see their shares languish at lower levels years later. An obvious case is retailer Marks & Spencer (MKS), which rejected a £9 billion bid from Philip Green in 2004, yet nearly two decades on is still valued at less than £4 billion.
Moreover, not notifying shareholders or the market in general about the original approach from NAS before today raises questions about the firm’s openness in our view. Companies have a duty to keep shareholders and the market informed at all times about price-sensitive material.
READ MORE ABOUT MENZIES HERE
