M&C Saatchi shareholder voices concern over ‘too low’ Next Fifteen acquisition deal
A shareholder in independent agency M&C Saatchi has "expressed concern" its potential sale to British group Next Fifteen Communications (NFC) undervalues the company, in a letter set to prolong the agency’s winding path to acquisition.
Major M&C Saatchi shareholders have stepped into the fray regarding a possible sale to Next Fifteen
Artisan Partners International, an investment fund, manages a stake equal to 1.1% of M&C Saatchi. The fund’s manager, Anand Vasagiri, wrote to M&C non-executive chairman Gareth Davis today suggesting that "simply, we feel the cash and share offer is too low” and that "we believe other M&C shareholders may hold views similar to ours” in a 600 word missive.
The intervention follows complaints by AdvancedTVLtd and Vin Murria, together representing over 22% of M&C's shares, that the offer to purchase M&C by Next Fifteen was too low. AdvTVLtd and Murria had previously made repeated offers to acquire M&C, and themselves been rejected by the agency's board for undervaluing the firm.
Next Fifteen originally offered M&C shareholders 247.2p per share, combined with shares in NFC in a deal which valued the firm at $390m (£310.1m). M&C's independent board, led by Davis, recommended shareholders agree to the deal back in May. But since then, Next Fifteen's own share price has dropped 15% (approximately 220p per share), with the knock-on effect of devaluing its offer to M&C's shareholders.
Vasagiri has now called that offer ”disappointingly modest.”
“In our estimation, even the original acquisition price... is a depressed valuation, especially as the business is expected to grow at a solid double-digit pace. Given the approximate 15% drop in NFC's share price since the announcement, the NFC offer is now even less appropriate... and M&C shareholders remain at risk of continued deterioration in their eventual realized value. Moreover, these low valuations do not factor in the substantial synergies NFC will gain post-transaction. Consequently, we feel the sale of such a valuable franchise at a depressed multiple and valuation is an unacceptable outcome for M&C shareholders.“
In the letter, Vasagiri argued that M&C's board should seek an improved offer from Next Fifteen.
”We recommend that the board reconsider its endorsement of the NFC offer. We ask the board to instead reject NFC's current offer and seek an improved bid, one that more fairly compensates M&C shareholders. Finally, we suggest that any offer in which shares of an acquiring company are to be exchanged for M&C shares should include appropriate anti-dilution protections.”
The contest between Murria and AdvTV, and NFC to acquire M&C began in January.