London's rush of deals continues. The board of marketing agency M&C Saatchi (SAA) has recommended a £310mn bid from competitor Next Fifteen Communications (NFC). This is a blow to M&C Saatchi deputy chairwoman and serial tech investor Vin Murria, who has been attempting to take over the company through acquisition vehicle AdvancedAdvT (ADVT) since January.
At no point was M&C Saatchi’s board impressed with the cash and share offer Murria put on the table and on Wednesday it erupted into full hostile takeover when Murria circumvented the board and went directly to shareholders.
AdvT made an offer of 40p a share in cash plus 2.043 AdvT shares which implied a total value of 207.5p per M&C Saatchi share. Together Murria and AdvT own 22 per cent of M&C Saatchi.
M&C Saatchi chair Gareth Davis said the offer was "derisory” and urged shareholders to rejected the bid “as it significantly undervalues the business and prospects of M&C Saatchi”. Most damningly M&C Saatchi accused AdvT of not recognising the potential of the business but instead only having a strategy of “financial engineering and M&A”.
The board-backed cash and share offer from Next Fifteen values M&C Saatchi at 247.5p per share which is a 49.8 per cent premium to the last closing price. It is largely a share-based offer, coming down to 40p in cash and 0.1637 Next Fifteen shares per M&C Saatchi share held.
The M&C Saatchi board has therefore advised shareholders to “take no action in respect of the AdvT offer”. Davis said the Next Fifteen offer implied "a value for M&C Saatchi that represents a significant premium to recent trading levels" and gave shareholders "an opportunity to crystallise value and to benefit from the potential future upside of the enlarged group".
Now the question is whether Murria will further act as a blocking force with her significant stake in the company or take the cash and shares. The next steps will see M&C Saatchi shareholders vote on the offer, with 75 per cent support needed for the deal to go through. Murria's vehicle AdvT said it was considering its options on Friday morning.
The hope is that the potential merger of the two agencies will give them the geographic scale to profit from the growth in demand for digital marketing. The theory is that both companies would benefit from “synergies” because investment in data driven marketing capabilities could then be rolled out to a larger client base.
The logic is sound and clearly makes a lot more sense from an operational perspective that merging with an acquisition vehicle. M&C Saatchi’s share price is up 35 per cent to 223p this morning.
Last month, Next Fifteen reported stronger underlying profits and improved margins across several divisions. Read our full write-up here.
