Lord Rothermere has increased his offer to take DMGT private after some investors felt he was undervaluing the business.
He has upped the offer by 5.9%, taking it to 270p per share from 255p per share.
Majedie Asset Management, which has a 4.6% stake, had urged shareholders not to accept the offer as it was “substantially below what we believe is a fair and reasonable valuation”.
Meanwhile JO Hambro Capital Management, which owns about 3% of DMGT shares, had said it was “underwhelmed and unconvinced” by the proposal.
Lord Rothermere has also lowered the acceptance threshold of shareholders needed to accept the offer from 90% to 50%.
Original story 3 November:
Lord Rothermere has agreed a takeover plan with the company that publishes the Daily Mail and Mail on Sunday in a move that will see the group taken private after nearly a century on the stock market.
Majority shareholder Lord Rothermere has agreed to pay 255p a share for Daily Mail and General Trust (DMGT) plus debts, putting the company value up to £850 million from an £810 million or 251p a share proposal first made in July.
Shareholders will also receive a special dividend worth 991p for each DMGT share following the recent stock market listing of used car business Cazoo, which DMGT had a stake in, and the sale of its insurance division RMS.
DMGT investors will also receive a final dividend worth 17.3p a share, with DMGT saying the total value of the offer and investor payouts comes to £12.63 a share – or just over £3 billion including debts.
The buyout is for the 64% of the company the Rothermere family, which founded the Daily Mail, does not already own. It has been recommended by DMGT’s independent directors subject to shareholder approval by 16 December.
However major shareholder Majedie Asset Management, which owns 4.6% of DMGT’s Class A shares, told Bloomberg it would oppose the deal.
Majedie UK income fund manager Chris Field told Bloomberg the offer “is substantially below what we believe is a fair and reasonable valuation”.
“There is an inherent asymmetry of information working against non-family shareholders which we have urged the Non-Executives to address to allow shareholders to make an informed decision.
“We strongly urge shareholders not to accept the offer.”
The deal comes after DMGT said all pre-conditions of reaching a deal were satisfied, having come to an agreement with trustees of the group’s pension funds, which will see Lord Rothermere pay £412 million into the schemes.
The pensions agreement had been the final sticking point holding up a final offer from Rothermere Continuation Limited (RCL) after it first made a takeover proposal in July.
‘Fair’ terms to take DMGT private
Lord Rothermere, director of RCL, said: “The sale of RMS and the Cazoo IPO have delivered excellent shareholder returns, but inevitably DMGT is now a considerably smaller group of businesses, with significantly greater exposure to consumer media.
“This has led RCL and the DMGT board to decide to implement a major reorganisation of the group by distributing the value created by the RMS sale and the Cazoo IPO in conjunction with the offer.
“RCL’s proposal will now have the effect of increasing the aggregate cash distribution by some £40 million, the cost of which will be borne by RCL if its offer is accepted.
“We believe the terms of our offer to be fair, particularly bearing in mind not only the existing level of debt within DMGT at a time of increasingly difficult market conditions, but also the restrictions imposed on the operation of the business as part of the settlement with the pension trustees.”
DMGT’s consumer media business comprises the Daily Mail, The Mail on Sunday, Mail Online, Metro, the i, New Scientist and start-up news digest brand the Knowledge. DMGT also contains property information brands, DMG Events, and DMG Ventures.
DMGT said it had not received recent offers for any of these businesses and it was “not minded to seek any offers because taken as a whole the cash generative businesses are capable of supporting the businesses that need restructuring over the next five years and servicing the debt remaining in the group”. RCL has no plans to sell any part of the business.
Media business trading update
DMGT said “substantial increases in distribution and energy costs, as well as increases in the cost of newsprint in supplier contracts at levels not
seen since 1996” have started to affect the profitability of the newspaper businesses in recent months. Newsprint is the second largest cost item for the consumer media business.
The company is currently looking at ways to mitigate these cost increases including, it said, “a review of employee numbers”.
Other than this the only job cuts currently anticipated by RCL fall under corporate and central management departments in central, listed company-related functions.
Mail Online once again grew revenue despite readership falling compared to the “exceptionally high” levels of 2020. Its future performance depends on factors including audience size, sustained engagement, changes to cookie and privacy settings, and advertising and marketing revenues, DMGT said.
DMGT said the free commuter newspaper Metro was loss-making in the full-year to 31 September due to lower footfall during the Covid-19 pandemic and the “relatively weak” print advertising market.
The ad market “remains volatile” and the newspaper’s outlook is “particularly difficult to predict” with a “very substantial recovery in commuter traffic” still needed, the company said.
The New Scientist’s performance was said to be consistent with expectations held upon its acquisition in March this year. It was expected to make revenue of £20m this year and an operating profit of £7m this year.
Also announced on Wednesday DMGT’s executive director and group chief financial officer Tim Collier has stepped down after five years, a decision which DMGT said was unconnected with the reorganisation.
Lord Rothermere said he had been “instrumental in the sales of several of our businesses, most recently RMS, and the balance sheet has been strengthened substantially during his tenure”.