Wednesday 20th Mar 2019 - Logistics Manager Magazine

Hedge fund bids for TDG

TDG has confirmed that it has received an indicative cash offer at 275 pence per share from Laxey Partners Ltd, which currently owns some 22 per cent of the issued share capital of TDG.

Preston Rabl, chairman of Laxey, said: “We have been investors in TDG for over a year and are excited about the opportunity to back TDG, its management team and employees. The company has a strong customer base, which we value highly, and we support the company’s strategy. We believe that our proposal is fair and attractive to shareholders, representing approximately a 29 per cent premium on the one month average and approximately a 34 per cent premium on the three months average share price”.

Laxey’s preconditions to announcing a firm intention to the making of an offer are completion of satisfactory due diligence, the finalisation of financing arrangements and the recommendation of the board of TDG that TDG shareholders accept the offer.

TDG said: “Discussions are ongoing and there can be no certainty that the approach will result in a formal offer being made for the company even if the preconditions are waived or satisfied. Laxey has reserved the right to offer a lower price if it were to be recommended by the TDG board.”

Laxey describes itself as an investor in companies which it believes are undervalued. “Having researched these companies in great detail, Laxey encourages and supports these companies to fulfil their potential and hence enhance shareholder value.”

Laxey operates as a “hedge fund” with investments in three main areas: European value investments in quoted operating companies, global discount arbitrage strategies, general global special and arbitrage situations.

Profits boost

TDG has reported headline operating profit up by 13 per cent to £20.4m (2006: £18.0m) for 2007  on turnover up by 26 per cent at £669.5m (2006: £531.3m).

Chief executive David Garman said: “I am pleased to report improved results for 2007, with trading a little ahead of our expectations set a year ago and clear signs that our strategy is delivering.

“We will continue to pursue this strategy – to build on our positions of strength in specialised sectors of the contract logistics market, in freight forwarding and in supply chain management – which has already improved the quality and level of the Group’s earnings.

“At the same time we will continue to counter ongoing margin pressure through effective account management and aggressive cost management to enhance efficiencies. Overall, we are confident that the Group will make further progress in 2008.”

TDG’s is focused on increasing presence in three priority areas:
* Growth in specialised sectors of the contract logistics market including chemicals, paper & packaging and temperature controlled services.
* Continued expansion in freight forwarding and integrated end-to-end logistics.
* Growth in supply chain management operations such as the Corus  contract.

The Group’s margin of operating profit on turnover decreased from 3.4 per cent to 3.0 per cent, reflecting the shift in TDG’s business to a less capital intensive business model, as well as competitive pressures.

In the Contract Logistics division margins reduced from 3.0 per cent in 2006 to 2.8 per cent, due to price pressure in the general market and the greater share of turnover accounted for by freight forwarding following the acquisitions of Bradship and Brisk Airfreight. The freight forwarding model is asset light, with the forwarder employing third party assets, but is capable of earning high returns from a small capital base.

The margin in the Chemicals division reduced from 4.2 per cent in 2006 to 3.5 per cent, reflecting the growing supply chain management contract for Corus, with its negligible capital requirement, as well as the use by Doman of subcontractors to provide national and international transport services.

For 2007 the Contract Logistics division produced operating profits three per cent higher at £11.8m (2006: £11.5m) on turnover ahead 12 per cent at £421.7m (2006: £377.5m).

The result reflected strong performances in freight forwarding and other specialised target sectors, improvement in the Netherlands and Ireland and benefits from the divisional reorganisation. However, conditions in general markets remained challenging.

The Chemicals division produced operating profits up 32 per cent to £8.6m (2006: £6.5m) on turnover 61 per cent higher at £247.8m (2006: £153.8m).

The result reflected progress in the strategy to expand packed & speciality chemicals operations into Mainland Europe, with a strong first ten months from Doman and further growth and a full year contribution from Mond.