RSM Tenon shareholders will not accept a ‘minimal offer’ from accountancy firm Baker Tilly that offers little cash value due to high debt liabilities, according to a major shareholder in the accountancy and financial services firm.
News broke on 25 July that Baker Tilly is looking at the possibility of acquiring RSM Tenon. At the time, the accountancy firm said it would likely be “significantly below” the current share price. RSM Tenon shares plummeted 34 per cent to close on 2.25p following the comments.
In an update, published on the London Stock Exchange on 16 August, RSM Tenon said discussions with Baker Tilly “are continuing” but warned that “it is now likely that, as a consequence of the company’s high debt level, if an offer is made by Baker Tilly, minimal value, if any, will be attributed to the issued share capital of the company”.
Lloyd’s is the sole banker with exposure of around £80m.
A RSM shareholder holding 5 per cent of the company’s share capital, who did not wish to be named, told FTAdviser that shareholders will not accept a ‘de minimis’ offer from Baker Tilly.
He said: “The only way it could go through is if Lloyds use their powers as major stakeholder, but if this appears likely RSM’s board may well call administration which would scupper a forced sale at no equity value and leave Lloyds with a £75m write off.”
He added: “It makes sense for each stakeholder to negotiate with RSM Tenon’s management and board.
“Lloyds either take a haircut to a manageable level of debt (£50m i.e £25m haircut) possibly with some debt for equity (they already have warrants over 9.9 per cent of RSM Tenon). The company can service its debt and is a turnaround situation without a complex merger with Baker Tilly.
“The directors could take compensation in excess of, say, £100,000 in the form of deferred shares as the company would then make large cash profits, the values of the shares would rise and they would come out way ahead.
“Landlords should allow lower rents or shorten leases because the alternative could be zero rent receivable in case of administration.”
According to the shareholder, RSM Tenon has around £160m in fee income, “roughly the same as Baker Tilly which makes £12m to £15m annual profit”.
He said: “A merger of the firms would not be risk free for Lloyds - these firms have very different DNA and a merger could be very messy.”
