National Aviation Services (NAS) has claimed that its proposed acquisition of John Menzies could protect the company from post-pandemic shifts in the industry.
The Edinburgh-headquartered aviation services firm's board yesterday rejected the 'unsolicited and highly opportunistic' offer which valued it at around £468m.
The proposed 510 pence per share offer represents a 76% premium on the closing price on 2 February. Kuwait-based NAS made its first offer of 460p per share on 17 January.
NAS group chief executive Hassan El-Houry urged Menzies’ shareholders to back the offer, arguing that it represents a “compelling opportunity for shareholders to realise full value for their investment in cash”.
He commented: “In our view, the fundamentals of Menzies and of the industry as a whole are unlikely to change substantially, notwithstanding cost-cutting measures.
“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 pandemic that has largely decimated the industry.”
NAS, part of the Agility Public Warehousing group, has a presence in more than 55 airports across the Middle East, Africa and South Asia.
A statement from the group explained that its advisers have considered publicly-available information in detail, including Menzies’ performance before the pandemic, recent cost reduction measures, contract renewals and new business wins, alongside debt service obligations and ability to generate free cash flows, particularly in light of investments required to remain competitive and grow.
NAS stated that the two companies share “highly complementary geographical footprints and product portfolios, with minimal overlap”, with a merger potentially bringing greater geographical diversification to Menzies.
Yesterday's response from the Menzies board said that while the offer was "carefully considered" with financial advisers Goldman Sachs, it was unanimously rejected, as the terms "fundamentally undervalue" the company and its future prospects.
A trading update in November showed record net sales of £73m, following the retention of contracts and other new contract wins.
The Edinburgh-headquartered aviation logistics company experienced increased volume of new business, with its cargo division having a “record year” following the pandemic, which led to the company restructuring in 2020.
It is expecting its cargo business to continue increasing following the continued expansion of the e-commerce market following the pandemic, while new contracts have driven the volumes handled in 2021 to 115% of 2019 levels.
The company's liquidity stood at £150m on 31 October, while net debt was in line with its expectations and currently expected to be around £200m going into 2022.
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