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Team plc, a company that on AIM, on 23 March 2021 that it had made a confidential approach to Tavistock Investments plc (Tavistock), on 11 March, regarding a possible offer. As part of this, Team requested access to mutual due diligence. However shortly after, on 15 March 2021, Tavistock notified Team that it would not engage or provide access to due diligence materials.

Team, therefore, approached the shareholders directly, stating ‘that Tavistock shareholders deserve the opportunity to decide on the merits of any offer, and that if an approach is made in good faith, the Tavistock Board should act in the interests of its shareholders by engaging with the potential offeror and not deny its shareholders this opportunity’.

Team announced the possible offer for the entire issued and to be issued share capital of Tavistock at an exchange ratio of 1 Team share for 36 Tavistock shares. The offer implied a value of 2.5 pence per Tavistock, representing a 28% premium to Tavistock’s closing price as of 10 March 2021 (being the last business day prior to the approach). This values Tavistock at £15.2 million.

Team cited that the combination ‘could have the potential to transform the investment proposition for Tavistock shareholders as a result of greater scale, a clean and ‘fresh’ investment thesis, a more liquid Privacy market in the shares, a stronger balance sheet and significantly improved access to equity and debt markets’.

Tavistock has since to the announcement, stating on 24 March 2021 that Team failed to mention the original terms of the offer were 1 Team share for 45 Tavistock shares, instead of the 1:36 exchange ratio Team had announced. Furthermore, based on the prevailing share price of Tavistock at the time, this represented a 0% premium. The board stated it rejected the proposal on 15 March 2021, as it ‘significantly undervalued Tavistock and its standalone prospects’.

Tavistock further went on to highlight that Team has a ‘negligible track record of successfully acquiring and integrating businesses to create a larger group’, and that very few of Team’s shares have been traded since its debut, making their shares illiquid.

Regarding the current offer of 1 Team share for 36 Tavistock shares, the board has cited the following reasons for rejecting the offer, and has advised shareholders to take no further action:

• The offer significantly undervalues the business.
• The board does not believe there is any commercial logic or ‘sufficient operational synergies’ that justifies the combination
•  The board does not consider the offer of ‘illiquid shares’ which would represent over 50% of the enlarged share capital for the combined group is ‘credible or warrants further consideration’.

Team’s offer remains conditional on the completion of satisfactory due diligence which would require engagement from the Tavistock board, although it reserves the right to withdraw this pre-condition.

Team has until 20 April 2021 to confirm whether it will be making a firm offer for Tavistock.

Market Tracker will continue to monitor this transaction as it develops.