Marshall Motor Holdings plc (LON:MMH), one of the UK’s leading automotive retail groups, has provided the following update regarding the terms of a cash offer to be made by Constellation Automotive Holdings Limited by its wholly-owned subsidiary CAG Vega 2 Limited of 400 pence per share for the entire issued and to be issued share capital of the Company announced on 29 November 2021.
Background
In the Offer Announcement, Constellation stated that it had received an irrevocable undertaking to accept the Offer from the Company’s 64.4% majority shareholder, Marshall of Cambridge (Holdings) Limited.
The Offer is conditional on:
(i) Bidco having received acceptances carrying more than 50 per cent. of the voting rights of MMH normally exercisable at a general meeting of MMH; and
(ii) the requisite regulatory approvals from the FCA being obtained. The FCA has up to sixty working days to consider an application for a change of control of MMH.
Change of control of MMH will not take effect until the above conditions have been satisfied.
Constellation is required to publish an offer document and a form of acceptance accompanying the offer document as soon as practicable and, in any event (save with the consent of the Takeover Panel), within 28 days of 29 November 2021.
Given the above, the Board of MMH is therefore now required under the Takeover Code to consider its position in relation to the Offer and in particular, whether to recommend shareholders accept the Offer.
About Constellation
In the Offer Announcement, Constellation describes itself as “a large integrated used vehicle services group, covering both the UK and continental Europe”. It says it aims to “provide a comprehensive range of services including logistics, customs management, storage, inspection checks, refurbishment, vehicle preparation, finance and pricing data. Through its exchange platforms, it brings together OEMs, leasing companies, fleet operators, retail dealers and buyers to facilitate the efficient transfer of vehicle ownership while protecting value”. Constellation describes itself as “a facilitator and link to the automotive value chain, supporting manufacturers, dealers, finance and leasing companies and the end consumer”.
In the Offer Announcement, Constellation also said that it is “focussed on broadening its offering for both consumers and business partners across the UK and Europe, and the potential acquisition of Marshall continues this strategy”.
Consideration of the Offer
In addition to the financial terms of the Offer, the Board of MMH places significant emphasis on the wider responsibilities of ownership of MMH. These include its history and culture, its relationships with its manufacturer brand partners which have been fundamental to MMH’s success to date, and the important role that MMH plays for other stakeholders, including its employees, customers and suppliers.
The Board of MMH has placed reliance on the information contained in the Offer Announcement and the statements made by Constellation during a meeting between the respective parties last week.
In particular, the Board of MMH has taken into account statements made by Constellation regarding its intention to work with MMH’s manufacturer brand partners for a long term partnership and for MMH to continue to grow. The Board also notes that Constellation itself has longstanding strategic business relationships with a number of automotive manufacturers in both the UK and Europe.
In addition, the Board has noted Constellation’s statement that it has no intention to make any changes to the conditions of employment or the balance of the skills and functions of MMH employees or management. The Board also notes the statement made by Constellation in the Offer Announcement that it is looking forward to working with the employees at Marshall to build on their success and progress to date.
The Board has also considered the financial terms of the Offer and whether it reflects an appropriate valuation of MMH and its future prospects. The Offer price of 400 pence per share in cash values the entire issued and to be issued share capital of MMH at approximately £325 million and represents a premium of approximately:
· 86.6 per cent to the volume-weighted average price per share of 214.3 pence for the twelve month period to 25 November 2021 (the last business day prior to the start of the offer period);
· 168.5 per cent. to the AIM admission price per share of 149 pence on 2 April 2015; and
· 41.3 per cent. to the closing price per share on 25 November 2021 (the last business day prior to the start of the offer period).
The Offer price of 400 pence per share in cash, and taking account 36.49 pence per share of dividends paid to shareholders, represents a total shareholder return of 293 per cent. and an IRR of 20.6 per cent. to MMH’s AIM admission price per share of 149 pence.
Recommendation
The Board, having been so advised by Investec as to the financial terms of the Offer, consider the terms of the Offer to be fair and reasonable. In providing financial advice to the MMH Directors, Investec has taken into account the commercial assessments of the MMH Directors. Investec is providing independent financial advice to the MMH Directors for the purposes of Rule 3 of the Code.
Accordingly, following careful consideration of both the financial terms of the Offer and Constellation’s stated intentions regarding the conduct of the MMH business under Constellation’s ownership, the Board intends to recommend shareholders accept the Offer.
