Management launch £23m take-private bid for Morson

THE founders of AIM-listed recruitment company Morson Group have launched a bid to take the Salford-based company private.

Chairman Gerry Mason and his son, chief executive Ged Mason, have made an offer of 50p for the company’s shares, valuing the business at around £23m. The offer has been made through a newly-created acquisition vehicle, MMGG Acquisition Ltd, which also includes Morson’s finance director, Paul Gilmour and its group managing director, Kevin Gorton.

It has announced that it has already received acceptances for its offer from 57.37% of shareholders, and the offer has been recommended by the firm’s senior independent director Ian Clarke, who, after taking advice from WH Ireland, deemed the offer to be “fair and reasonable”.

The bid may not be as well-received by long-term shareholders, though. When the company floated in 2006, it was valued at £72m, or 160p per share.

Its valuation peaked at 257p per share in May 2007, but has been on a largely downward slide since and by close of play yesterday its shares stood at just over a quarter of its float price at 41.5p, giving it a market capitalisation of £18.8m.

Moreover, since Ged & Gerry Mason also retain just over 46% of the company’s shares, the chances of success from a “White Knight” bid by a competitor would be slim – particularly as the two men occupy such crucial roles in the business.

Most of the other significant shareholders in the company are held by fund managers – some of which are income-generating funds.

However, when announcing its 2011 results last month, which showed a 39% drop in pre-tax profits to £5.7m despite an 11% increase in earnings to £507.9m, the company announced that it would not be paying dividends due to “the need to manage cash resources appropriately”.

It also said “there can be no guarantee” that a dividend will be paid out in the current financial year.

David Gorman, a director of Manchester-based independent stockbrokers Milkstone, said that he “can’t say I’m surprised” that the bid has been launched, but added that he believed it undervalued the business.

“They (MMGG) are getting a good deal, and I think it’s good timing on their behalf as well. Historically, many of the institutions that have held the stock have held it for the dividends.

“The fact that Morson passed on the dividends last year and that there’s no great likelihood of a dividend payout this year probably disappointed them.

“Financial markets are not as patient with cyclical performance, and the management know that as a private company they can ride this out more easily than as a plc.”

Morson Group is headquartered in a £9m, 55,135 sq ft office development in Eccles, which it agreed to lease from Centenary Property Developments LLP – a partnership between Ged Mason and an offshore trust controlled by Gerry Mason – in 2008.

The company signed a 20-year lease on the building at an initial rent of £16.50 per sq ft, subject to upwards-only rent reviews every five years.

The Masons’ bid to take the firm private is being backed by Barclays, and they are being advised on the deal by law firm Atticus Capital and Spark Advisory Partners. Morson plc is being advised on the bid by WH Ireland and Brabners Chaffe Street.

If approved, the take-private bid is likely to be the first of two significant deals involving North West recruitment businesses in the coming weeks, with family-owned Fircroft poised to sell a stake in its business to private equity firm Equistone.

Equistone, formerly Barclays Private Equity, is in exclusive talks with Warrington-based Fircroft, which is being advised by investment bank Altium.