Baker Tilly walks away from RSM Tenon 'shares' deal

BAKER TILLY has announced it will not make an offer for RSM Tenon, leaving the listed firm’s future in jeopardy.

According to announcements from RSM Tenon this morning, the Financial Conduct

Authority has temporarily suspended the firm’s shares at its request “pending an announcement”.

Meanwhile Baker Tilly issued a statement to confirm “that it does not intend to make an offer for the entire issued share capital RSM Tenon”.

However, Baker Tilly did say it believes there is “significant” value in the RSM Tenon Group.

It also added it would be interested in an “acquisition of part or all of the business”.

A statement from Baker Tilly said it: remains of the view that there is significant value in the RSM Tenon group and continues to be interested in an alternative potential transaction involving an acquisition of part or all of the business of the RSM Tenon group provided that such alternative potential transaction does not constitute an offer falling within the jurisdiction of the City Code.”

Earlier this month RSM Tenon said investors were likely to receive “minimal value” if the firm merges with rival Baker Tilly due to the high level of debt the listed firm carries.

“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,” the announcement said.

RSM Tenon’s share price has declined 78.37% since February’s announcement in the six months to yesterday, according to the Share Price Centre. Shares closed at 1.37p yesterday, with an estimated market cap of £4.04m.

Possible outcomes for RSM Tenon include another buyer, Baker Tilly purchasing certain part of the firm or Tenon entering into an insolvency process to sell off parts of the business and recoup losses for creditors.

Although the firm could renegotiate banking covenants and continue to be listed, given that it suspended shares this morning, that outcome is unlikely.

Tenon first made the announcement on 25 July that it was in discussions with Baker Tilly over a possible merger and had been providing Baker Tilly with information to conduct due dilligence on the firm.

In February, RSM Tenon announced it was unable to reach a new agreement with its sole lenders Lloyds Bank to “reset” the terms of its lending facility, though it added that discussions were ongoing.

The announcement came in its interim results, which revealed the covenants on its credit facilities were set and based on a larger firm than it now operates. Unless a reset was achieved it was likely to breach its covenants in the forthcoming 12 months.