Rival haulier decides against proceeding with an offer for Eddie Stobart
The board of haulier group Wincanton announces announced this afternoon that it has decided not to make an offer for struggling rival Eddie Stobart.
Wincanton originally announced on October 18, that it was conducting a due diligence exercise on Warrington-based Eddie Stobart and its assets.
This was three days after Eddie Stobart’s board had agreed to a deal that will see Isle of Man based Douglas Bay Capital Fund mount a cut-price £55m rescue deal for the group which has been fighting for survival due to a series of issues and an ongoing accounting scandal which meant it has been unable to publish its financial results.
The prospective deal meant the business and thousands of jobs appear to have been saved.
Wincanton’s due diligence exercise was extended to a November 27 deadline, after a previous November 15 deadline passed with the firm saying it had not received the requisite information to conduct sufficient due diligence by that date.
Wincanton said it commenced the due diligence process on the basis of a strategic rationale that a business combination could create significant value for all stakeholders.
It said today it has performed a significant amount of work, but has yet to receive full disclosure of the information requested to enable it to complete its due diligence exercise. Further, it said there is still no visibility on when Eddie Stobart’s auditor’s review may be complete.
Wincanton’s statement said today: “The recent disclosures by Eddie Stobart have confirmed a material reduction in EBIT, poor cash collection and higher net debt.
“Even with the incremental synergies which would be available to a trade buyer such as Wincanton, the board cannot see how concerns with regards to Eddie Stobart’s financial performance and ongoing liquidity can be sufficiently overcome to enhance Wincanton’s shareholder value through a combination of the businesses.
“As a result, the board has decided that it would not be acting in the best interests of Wincanton shareholders to proceed with an offer for Eddie Stobart.”
Wincanton chairman, Dr Martin Read, said: “Wincanton will continue to explore acquisition opportunities to complement its organic growth, but we owe it to our shareholders and other stakeholders not to take disproportionate risks in the development of the business.”
A statement from Eddie Stobart said: “The board of Eddie Stobart is disappointed that Wincanton felt it was unable to put forward an offer to shareholders despite being granted access to extensive due diligence since mid-September 2019.
“This included provision of comprehensive company information, alongside multiple meetings with senior and divisional management of Eddie Stobart, for both Wincanton and its advisers.
“The board actively encouraged Wincanton to put forward a proposal to the board, and ultimately to shareholders.
“However, at no stage of their involvement in the process was any offer forthcoming, nor any indication as to the terms of any offer should one be forthcoming.”
The deal announced on November 15 by Eddie Stobart revealed that Douglas Bay Capital Fund will buy a 51% stake of a new entity that would then become the holding company for Eddie Stobart.
Existing Eddie Stobart investors’ own shares in the firm will be turned into part of a 49% stake in the holding company.
The deal means the firm is being sold at a huge discount to Eddie Stobart’s share price in August, when it suspended shares over the ongoing accounting scandal.
At the time shares were valued at 71p, giving the business a value of almost £270m.
