Accountancy Baker Tilly has announced that any offer for advisory and support services business RSM Tenon would be made “solely in cash”, as speculation mounts that the takeover talks will lead to an offer for the business.
News broke last Thursday (25 July) that Baker Tilly was looking at the possibility of making an offer for RSM Tenon, which the latter said would likely be “significantly below” the current share price. RSM Tenon shares plummeted 34 per cent to close on 2.25p following the comments.
The company stated that any offer would be low owing to its high debt levels, which would also require any deal to be approved by its sole lender, Lloyds Banking Group. According to its results for the year to June 2012, net debt increased to £78.3m from £68.2m in 2010/2011.
According to the same results announcement, last year the firm made a loss after tax of £88.7m after having made profit of close to £1m in 2010/2011. It posted an underlying operational loss of £8.9m - in 2010/2011 it registered underlying profit of £18.5m - as revenues fell by almost 9 per cent to £208.2m.
As part of a major restructuring which saw 400 staff made redundant, RSM Tenon sold its insolvency unit to Grant Thornton in a £7m deal in October 2012.
Earlier this year the company won a £5.5m payout after an arbitrator ruled its insurers should pay the costs of disputing a Financial Services Authority fine from 2010.
The Financial Services Authority fined the company £700,000 in 2012 for failures in its advice and sales processes involving structured products backed by Lehman Brothers.
However, a dispute arose between the firm and its insurers over whether the fine was covered by RSM Tenon’s professional indemnity insurance, which was eventually referred for resolution by confidential arbitrage.
The arbitrator has now ruled that RSM Tenon should receive £5.5m reimbursing costs resulting from the fine, which the company has said will result in exceptional profit for 2013 of about £2.8m.
Baker Tilly said in its statement: “As previously stated, there can be no certainty that an offer will be made for RSM Tenon nor as to the terms on which any offer may be made.”
