Stuber: Housing disrepair claims will improve working capital cycle
The proposed bid for Anexo Group – the listed company that owns leading law firm Bond Turner – is a “predatory attempt” to buy it at a fraction of its value, one of its investors has warned.
Among the reasons cited by Iconik Capital – a German investor that holds a 3% stake in the group – was the potential for both growth and efficiency gains at Bond Turner, including by introducing artificial intelligence (AI) into its case management.
In an open letter to Anexo’s independent directors this week, managing partner Frank Stuber said he wanted to express his “utmost concern regarding the potential takeover bid” being considered by DBAY Advisors, barrister Alan Sellers and solicitor Samantha Moss.
Last month, DBAY– with 28.5%, the largest single investor in Anexo – announced that together with the lawyer founders of the group, which combines credit hire and legal services, they were considering an offer for all of the company’s shares.
Mr Sellers, the group’s executive chair, and Ms Moss, managing director of Bond Turner, own 17.04% and 17.44% of Anexo’s shares respectively. The next largest shareholder has a 3.6% stake.
Frank Stuber, Iconik’s managing partner, urged the directors to “undertake an immediate and rigorous defence against this predatory attempt to seize control of Anexo plc at a fraction of its intrinsic value”.
He argued that Anexo was “significantly undervalued from an asset value perspective as well as from a current and forward earnings perspective”, while its “strategic business mix shift towards housing disrepair (HDR) claims” would significantly enhance its working capital cycle.
“HDR claims typically settle within 7-9 months, a stark contrast to the 18-24-month duration of credit hire claims. This accelerated settlement cycle translates to faster cash conversion, bolstering the company’s financial flexibility, and capacity for reinvestment.
“Management confirmed in its most recent trading update that housing disrepair work continues to make an increasing contribution to the group’s overall performance.”
Further, Bond Turner’s involvement in the diesel emissions litigation against car manufacturers meant the potential for “further substantial cash inflows is high”.
If valued conservatively in line with the already settled Volkswagen case, these would translate into net cash of more than £20m from the 37,000 claims Bond Turner currently has.
On AI, Mr Stuber said: “Since Bond Turner handles a large volume of standardised cases, AI implementation will lead to a substantial reduction in headcount (a significant cost factor), further enhancing profitability. The amount of cases managed per fee-earner will increase significantly in the future.”
Iconik also identified “growing demand” for HDR and credit hire services.
“Anexo’s strategic positioning in both these high-growth markets, coupled with its efficient case management and strong referral network, positions it to capitalize on this escalating demand.”
Mr Stuber warned that Iconik was “prepared to deploy all necessary measures to expose the inadequacy of any undervaluation”.
He explained: This includes actively engaging with the public to draw attention to the severe disparity between the offer price and Anexo plc’s true worth.
“We are also prepared to vigorously contest the fairness and equitability of any proposed scheme of arrangement before the sitting judge, ensuring that the voices of minority shareholders are heard and their interests protected.”
In a follow-up letter yesterday, Mr Stuber said other shareholders, representing a further 15% of the company and who “strongly oppose the potential takeover bid in its current proposed structure”, had reached out to him.
Highlighting the “insurmountable challenges” of another structure for the offer – a contractual offer for the outstanding shares, followed by a delisting attempt once 75% of the shares have been acquired – he said Iconik was “fully prepared to acquire additional shares in the open market as necessary”.
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