The Deltic Group has announced its proposed terms for a merger with Revolution Bars Group plc (together the ‘Enlarged Group’).
The proposal states that while the Enlarged Group would be run by the current Deltic management team, Revolution shareholders would own 65% of the company, with Ranimul shareholders owning 35%. There would also be no change to Revolution’s existing dividend policy.
Deltic proposes that Bob Brannan, Peter Marks and Alex Millington, current Deltic chairman, chief executive and group finance director, respectively will take similar roles in the Enlarged Group, complemented by appropriate independent non-executive directors.
Deltic’s proposal also states that the Enlarged Group should benefit from approximately £6.8m of currently identified pre-tax cost synergies – fully realised by the end of the second full year following completion of a merger – and approximately £900,000 of pre-tax financing synergies. Approximately 45% of the identified synergies are expected to be generated from headcount rationalisation, in areas where Deltic has identified an existing overlap, or where the operational management structure that Deltic plans to employ allows other headcount reductions.
Following Revolution’s trading update of 19 May 2017, its shares dropped from 203p to 105.5p on 3 July 2017. However, in its annual results released on 3 October 2017, PBT was up 25%, EBITDA was up 16% and like-for-like sales rose by 1.5%.
Deltic has stated that it will engage actively with shareholders until 5pm on 10 October 2017 to discuss the proposal. Notwithstanding its preference for the merger proposal, Deltic has until 5pm on 10 October 2017 either to announce a firm intention to make an offer for Revolution under Rule 2.7 of the City Code on Takeovers and Mergers, or announce that it does not intend to make an offer for Revolution.
If the Merger Proposal is to be implemented, it is expected to constitute a Class 1 transaction for the purposes of the Listing Rules, and as such it would require the approval of 50% of those Revolution shareholders who vote on the appropriate resolutions at a general meeting.