M&C Saatchi has rejected an improved takeover approach from Vin Murria’s investment vehicle, AdvancedAdvT, which has increased its original offer by 20% and proposed major boardroom changes at the agency group.
AdvancedAdvT’s fresh bid values M&C Saatchi at about £265 million (US$357 million).
The independent directors of M&C Saatchi said the offer continues to “significantly undervalue” the company, after telling AdvancedAdvT of its latest rejection on Sunday evening (23 January).
AdvancedAdvT initially made a reverse takeover approach for M&C Saatchi on 6 January at the equivalent of 185p per share, with shareholders in M&C Saatchi expected to swap their stock for shares in AdvancedAdvT under the terms of the deal.
M&C Saatchi rejected that proposal on 14 January, which prompted AdvancedAdvT to increase its offer by 20.7% to the equivalent of about 220p per share. It has also included a cash element for the first time.
Under the new terms, M&C Saatchi shareholders could opt to receive either just AdvancedAdvT shares (worth 220p per M&C Saatchi share) or a less valuable mix of AdvancedAdvT shares and 40p in cash (worth 200p per M&C Saatchi share), according to an analysis by stock broker Peel Hunt.
AdvancedAdvT said Moray MacLennan, the chief executive of M&C Saatchi, would remain as CEO but it would shake up the board of the agency group.
Murria, a former software entrepreneur, who is already non-executive deputy chair of M&C Saatchi, would become chair and would add two executive directors.
Gavin Hugill, the chief operations officer of Advanced AdvT and a long-serving colleague of Murria in the software industry, would become chief operating officer.
A new executive director “responsible for data, analytics and digital transformation” would also be appointed under AdvancedAdvT’s plans.
M&C Saatchi also needs to recruit a chief financial officer after Mickey Kalifa quit to join digital agency Dept, although he was planning the job move before AdvancedAdvT made its takeover approach.
A number of the existing non-executive directors of M&C Saatchi and AdvancedAdvT would also sit on the enlarged board.
Independent directors warn of concerns
The independent directors of M&C Saatchi, who are led by Gareth Davis, the non-executive chairman, highlighted “a number of areas of concern” in their latest response.
Exchanging M&C Saatchi shares for AdvancedAdvT shares would “dilute” the value of M&C Saatchi shareholders because of a planned incentive scheme for Murria and Marwyn, her private equity backer; the “alternate” offer with a mix of AdvancedAdvT shares and cash is “unacceptable” because it is lower than the all-share offer; and AdvancedAdvT has offered no “details” about its plan for “transformative digital-led M&A”, M&C Saatchi said.
The independent directors also warned the takeover approach could lead to a talent exodus, saying: “The proposed transaction with AdvT would cause disruption to the Company and its ability to continue to retain key employees.”
Murria, the top shareholder in M&C Saatchi, controls about 22.5% of M&C Saatchi. She has owned around 12.5% since 2020, and AdvancedAdvT bought 10% at the start of January 2022.
AdvancedAdvT pointed out its new offer is about 37.5% higher than the level at which M&C Saatchi’s shares were trading before the bid approach.
Peel Hunt values M&C Saatchi at 230p a share and said it expected AdvancedAdvT would have to increase its offer again.
M&C Saatchi's share price has slumped from 330p in 2019 because of accounting irregularities but it has shown signs of recovery and drawn a line under the scandal. The Financial Conduct Authority closed its investigation last week without taking any enforecement action.
M&C Saatchi said in a trading update on 21 January that annual profits were “materially ahead of its previous expectations”, which demonstrated “the success” of the company’s new strategy under MacLennan, who has been CEO since January 2021.
AdvancedAdvT, which has raised £130m, has said it wants M&C Saatchi to focus on digital, data and analytics and ramp up M&A to drive growth.
“The board of AdvancedAdvT believe this is a truly beneficial merger. It provides significant investment and additional expertise to build on the existing M&C platform, seeking to drive M&C’s future growth at significantly greater pace for the benefit of all stakeholders,” AdvancedAdvT said.
AdvancedAdvT’s own shares have been suspended since it made its takeover approach for M&C Saatchi and the value of its offer depends on the stock price of AdvancedAdvT when its shares resume trading.
AdvancedAdvT must make a formal offer for M&C Saatchi by 3 February, according to the rules of the City's Takeover Code.