M&C Saatchi has withdrawn its support for a £310m takeover bid from the digital marketing group Next Fifteen, saying it no longer regarded the terms as “fair and reasonable” amid pressure from another bidder.
The deal would have ended almost three decades of independence of one of Britain’s most famous advertising agencies. M&C Saatchi said the reason behind the withdrawal of its support was the decline in the value of Next Fifteen’s shares. They have fallen 28% since the deal was announced in late May.
The company said: “The M&C Saatchi directors … no longer consider the terms of the Next Fifteen offer to be fair and reasonable solely on the basis of the deterioration in value of Next Fifteen shares since the announcement date.”
London-listed Next Fifteen, whose market value has fallen to £884m from £1.2bn at the time the deal was announced, tabled a cash and share offer for M&C valuing the company at 247.2p a share that it wants to seal through a scheme of arrangement. The offer comprises 0.1637 of a new Next Fifteen share and 40p in cash.
M&C said the terms of the offer now imply a total value of 189p per M&C share. Accordingly, its directors “unanimously recommend” that M&C shareholders do not vote in favour of the scheme at the court meeting on 17 August.
Tim Dyson, chief executive of Next Fifteen, said: “We reached agreement with the board and executive team of M&C Saatchi after extensive negotiation and believe our offer is full and fair. We do not believe that the recent market volatility undermines the fundamental proposition of this transaction.”
The company noted that the Next Fifteen share price had declined in line with relevant market indices and sector peers.
It urged M&C shareholders to vote for the takeover, arguing that it “represents the most attractive of the choices facing M&C Saatchi shareholders, and provides the greatest opportunities for the future development of M&C Saatchi’s businesses”.
M&C, founded in 1995 by the brothers Maurice and Charles Saatchi, had agreed a deal with Next Fifteen last month, fending off a rival bid from its biggest shareholder Vin Murria’s AdvancedAdvT investment vehicle.
Earlier this month the advertising firm removed Murria, until then its deputy chair, from its board, after rejecting four offers from her investment vehicle, which asked M&C to clarify its analysis of the financial terms of the competing bids.
The company board had described Murria’s latest 207.5p a share offer, which valued the business at £254m, as “derisory” and said there was a “total lack of support” from its 18-strong executive team, which feared a talent and client exodus.
M&C said it considered both offers to be inferior to the company’s standalone prospects, based on financial terms alone.
“However, if those standalone prospects were incapable of being delivered as envisaged, then the M&C Saatchi directors consider the Next Fifteen offer to be superior to the ADV offer and Next Fifteen to be the preferred future owner,” the firm said. It cited “strategic, commercial, employee and cultural advantages which the M&C Saatchi directors consider Next Fifteen to offer the M&C Saatchi business”.
Shares in M&C fell 7% to 165p on Friday morning.