It is the kind of story that shows why online journalism has come to dominate the delivery of breaking news.
In the space of hours RSM Tenon’s prospective buyout had fallen through, the firm was placed into administration, and then it was dramatically acquired from the administrators by Baker Tilly, the very company that had been publicly courting it for a full takeover.
The events were akin to a domino snake tumbling. Baker Tilly pulled the plug on a takeover that would have saved the company, which was said to be likely to breach the covenants on its £80m debt pile with Lloyds. RSM Tenon subsequently was placed into administration; Baker Tilly swooped to pick up the group.
The sale is expected to complete within two weeks, following regulatory and shareholder approval.
The company announced on 16 August 2013 that it was likely that, as a consequence of the company’s high debt level, if an offer was made by Baker Tilly, minimal value, if any, would be attributed to the issued share capital of the company.
A major shareholder told FTAdviser that shareholders would likely not approve such a deal. He presciently predicted that the company might ultimately then be placed into administration ahead of a deal, which would likely leave Lloyds facing “a £75m write off”.
The sale agreed by the joint administrators will realise no value for the ordinary shares of the company. At 31 December 2012, the company had net borrowings of £80.4m. The terms of the sale agreement mean that Lloyds will not recover its secured debt in full.
Baker Tilly had effectively trailed its intention this morning. Announcing that the deal was off, FTAdviser reported on the firm’s statement to the stock exchange, in which bosses confirmed they still saw “significant value” in the RSM Tenon group and they would be interested in an alternative transaction “involving an acquisition of part or indeed all of the business of the RSM Tenon group”.
The firm added that it would look at such an option as long as it did “not constitute an offer falling within the jurisdiction of the City Code”.
As a result of the Baker Tilly deal the trading entities of RSM Tenon have not entered into insolvency proceedings and will continue to trade as normal. No employees, clients or suppliers (other than Lloyds) are expected to be materially affected. The company’s ordinary shares have been suspended from trading with immediate effect.
It is expected that, the joint administrators, on behalf of the Company, will request the UK Listing Authority to cancel the Company’s ordinary shares of 1p each from admission to the official list of the UK Listing Authority.
Back in July when the takeover talks between the two companies were announced RSM Tenon’s share price plummeted by 34 per cent. Baker Tilly had said that any offer would be in cash, but RSM had warned shareholders that they would see very little return due to its high level of debt.
According to the results to June last year, RSM Tenon’s net debt increased to £78.3m from £68.2m in 2010/2011. Last year the firm made a loss after tax of £88.7m after having made profit of close to £1m in 2010/2011.
RMS Tenon’s books have taken a beating in recent years due to the company pushing structured products backed by Lehman Brothers.
The business won a £5.5m payout in March this year after an arbitrator ruled its insurers should pay the costs of disputing a Financial Services Authority fine from 2010. The FSA fined the company £700,000 for failures in its advice and sales processes involving structured products backed by Lehman Brothers.
At the time of winning the ruling, Chris Merry, chief executive of RSM Tenon, said: “We continue to make good progress in restoring RSM Tenon to operating profitability and to consolidate the business turnaround.
“The market for our services remains highly competitive and I am grateful to our clients and staff for their continued support.”
