Sellers: Executive chairman
The lawyer couple behind listed credit hire and legal services group Anexo, together with an asset management firm, have formally launched their bid to take it private.
Shareholders were told that the group’s listing has not delivered the benefits – such as access to additional capital to support growth – that had been hoped for when it went public in 2018.
Barrister Alan Sellers, the group’s executive chair, and Samantha Moss, managing director of its law firm, Bond Turner, own 34.5% of Anexo’s shares between them. Their fellow bidder is Isle of Man-regulated DBAY Advisors, the largest single investor in Anexo with 28.5%.
Both a tender and a takeover offer were published yesterday, offering a different approach to that initially suggested when the possible takeover was announced in April so as to give shareholders at least a partial cash exit.
The tender offer gives Anexo’s other shareholders the option to sell up to 46.5% of their shares at 60p per share, a 17.6% premium on the closing price of 51p on 17 April, the last business day before the offer period began (they will be able to sell more if other shareholders choose not to sell their stakes, with £12m available in total).
Anexo shares had been trading higher since then but the price crashed 22.5% yesterday, from 68.4p to 53p.
Under the takeover offer, shareholders can choose to receive either loan notes in respect of their entire/remaining shareholding and receive a “preferred” return over a period of up to five years, or less certainty but a non-fixed outcome with non-voting B shares in the private group.
The 60p offer price values the entire share capital of Anexo at £71m.
Investors were told that the group’s independent directors “have been of the view for some time that Anexo’s current quotation is a barrier to long-term success”.
The takeover offer said “the lack of comparable quoted entities, the departure of many institutional shareholders from the register, and paucity of analyst coverage all constitute a drag on the value of Anexo shares in the near and medium term” – even financial results that meet analyst expectations have had “little positive impact on the share price”.
Various financial advisers told the board last year that Anexo “would be better placed to drive improvements in shareholder value as a private company”.
Among the reasons were that listing has “failed to provide Anexo with access to the additional capital required to support growth, noting that Anexo has, over the last five years, sought market support in fund raising without success, and has failed to effectively incentivise employees through share ownership”. It has had to turn to debt funding instead.
Further, there was “continued weak share price performance with an ongoing declining share price, limited trading liquidity in Anexo shares and lack of institutional shareholder appetite for both the business and its sector”.
Part of the reason for this was “a general lack of understanding” of the group among investors.
However, the offer document recorded that in the view of Grant Thornton, Anexo’s independent financial adviser, the tender price did not take account of the potential upside if the group’s investment in diesel emission claims panned out.
Further, given how the share price has performed since April – as well as the longer-term average –it did not consider the financial terms to be fair and reasonable.
Meanwhile, the loan notes were “inherently subject to the risks associated with illiquid and non-transferable securities”, and the value of the B shares was inherently uncertain, meaning Grant Thornton could not advise on whether the terms of either of these were fair and reasonable.
In response, the independent directors noted that many of the diesel claims were still at a very early stage, and also the joint bidders’ intention to seek a de-listing, subject to shareholder approval, whatever the outcome of the offers.
As a result, they considered the terms to be fair and reasonable, recognising “the medium-term risks and prospects of Anexo in its current form as a standalone, small-cap quoted entity”. As a result, they recommended that shareholders vote in favour of both offers.
In May, one of Anexo’s institutional investors described the then proposed bid as a “predatory attempt” to buy it at a fraction of its value.
Outrageously low offer by the bid consortium at a valuation less than 0.33 % of the book value. Hard to believe that the independent directors are acting in the interests of the minority shareholders given such a lowball offer.