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On 12 April 2022, Slate Asset Management L.P (Slate) that it no longer intends to make an offer for McKay Securities plc (McKay).

On 29 March 2022, McKay that the Canada-based private equity group had signalled it was interested in making a possible offer after Slate approached the company, under Rule 21.3 of the Takeover Code (Code), for access to due diligence information in order to allow Slate to consider the terms of an all-cash proposal for the entire issued, and to be issued share capital of McKay. The Takeover Panel, in accordance with Section 4(c) of Appendix 7 of the Code, Slate until 20 April 2022 to announce a firm intention to bid or walk away. However, the private equity firm withdrew from the running ahead of its deadline without providing a reason.

Slate’s possible offer was set to rival a board-recommended firm offer for McKay by Workspace Group plc (Workspace), a FTSE 250 REIT and one of London’s leading providers of flexible office space. On 2 March 2022, McKay and Workspace that they had reached agreement on the terms and conditions of a recommended cash and shares offer which valued the property investment company at £272m.

Commenting on the acquisition, Graham Clemett, CEO of Workspace : 

‘The market for office space is shifting, with businesses prioritising greater flexibility and the right location for their teams. This acquisition is a fantastic opportunity to accelerate our growth plans by capturing more of the strong demand we are seeing for our flexible offer in London, whilst selectively extending our reach into attractive commercial locations in the South-East. We will be a larger, more resilient company with an enhanced financial profile, and by applying our proven operational model and expertise, we expect to generate strong returns from McKay's portfolio of high-quality assets over the medium term.’

Despite, the favourable board recommendation for the Workspace offer, Slate decided to throw its hat in the ring and sparked the prospect of a bidding war with its all-cash proposal which was set to rival Workspace’s cash and shares combination. However in the face of Slate’s possible competing offer, McKay reiterated its unanimous board recommendation for the Workspace offer, determining that cash may not be king after all. Or perhaps the McKay board determined it would rather bet on a sure thing since there could be no certainty that Slate would make a firm offer.

After Slate pulled out of the running, a seemingly un-wounded McKay that ‘McKay directors continue to recommend unanimously to McKay shareholders the offer by Workspace Group plc’ and pressed ahead scheduling a shareholder vote for the Workspace offer on 27 April 2022. However, following the announcement McKay shares fell 2.4% to £2.90 per share. 

Despite the predictions of a private equity raid on UK-listed companies in 2022 (see: Private equity pounces on UK companies in recent takeover bids), Slate is the second private equity group to withdraw from making an offer for UK company in a matter of weeks. On 30 March 2022, US based private equity group, Apollo Global Management, also its possible offer for publishing company, Pearson plc. Like Slate, the company also pulled out ahead of its ‘put up or shut up’ deadline after they failed to reach agreement with the board of Pearson as to the terms of a proposal.

Our Public M&A Q1 2022 update will explore the hot topic of public to private transactions seen throughout last year and in Q1 2022 in more detail, to be published this month.

Market Tracker will continue to monitor the Workspace offer for McKay as it develops.