Majedie Asset Management has slammed a deal to take the publisher of the Daily Mail private as being “substantially below” fair value.
Last Wednesday the Rothmere family tabled a formal offer to snap up the remaining two thirds of shares in DMGT it does not own for 255p a piece, valuing the newspaper business at £850m including debt.
The family, which founded the Daily Mail in 1896, had previously offered to pay 251p for the company via its Jersey-registered holding company Rothermere Continuation Ltd (RCL), provided certain pre-conditions were met. These included the sale of its risk insurance business RMS and the IPO of Cazoo, which DMGT owned a £1bn stake in, and the completion of a £400m pension deal.
Shareholders will also be paid a special dividend of 568p and stock in Cazoo, as well as a final dividend of 17.3p, meaning they stand to receive £12.63 per share.
DMGT worth twice what Rothmere family have offered to pay
However, shareholder Majedie, which owns 4.6% of the business, has argued it is worth at least twice RCL’s offer and has urged shareholders not to accept.
“It is our opinion that the offer for the residual businesses following the sale of RMS and listing of Cazoo, is substantially below what we believe is a fair and reasonable valuation,” said Chris Field, manager of the Majedie UK Income fund.
“There is an inherent asymmetry of information working against non-family shareholders which we have urged the non-executives to address to allow shareholders to make an informed decision. Our appraised valuation estimate of only the largest businesses within DMGT materially exceeds double the current offer price of 255p. We strongly urge shareholders not to accept the offer.”
To proceed the deal must win at least 90% of shareholder approval. If that threshold is not met RCL can lower the threshold to 50% and DMGT would delist, becoming private for the first time in 90 years. Shareholders would then have an option to roll over their stakes into the unlisted vehicle.
Nick Train silent on DMGT takeover
DMGT’s largest shareholder Lindsell Train declined to comment on the deal when approached by Portfolio Adviser.
Nick Train’s boutique owns 13.6% of the publisher, which appears in his £2.1bn Finsbury Growth & Income trust and £6.3bn Lindsell Train UK Equity fund.
DMGT had been one of Train’s strongest performers in what has been a tough year for the star manager, with shares in the company doubling to £11.34 a piece since January.
Despite this, he argued UK investors were severely undervaluing DMGT and its digital assets. This was evidenced by US companies acquiring residual parts of the business at valuations that make sense to them but are much higher than UK investors would be prepared to pay.
“The controlling Rothmere family has now tabled an indicative offer to take the rump of the company private – confirming that nature abhors a vacuum and that if something stays too cheap for too long eventually someone will act to capture that value,” he said at the time.
See also: Nick Train highlights lowly valued holdings as Finsbury Growth & Income outperforms benchmark
