Investors likely to receive scraps or nothing in RSM Tenon deal

RSM TENON investors are likely to receive “minimal value” if the firm merges with rival Baker Tilly.

According to an stock market announcement by listed firm RSM Tenon today, the level of debt at the firm means its potential merger Baker Tilly would return little share capital.

“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.

Both Baker Tilly and RSM Tenon have been unable to provide any certainty on whether an offer would be made. Baker Tilly previously stated it would make an announcement on or before 22 August as to whether or not it would make an offer for RSM Tenon.

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.

It is understood that Lloyds is supportive of the firm while it is in discussions with Baker Tilly.

Since February’s announcement, the share price at RSM Tenon has dropped 82.9%. It stands today at 1.05p giving it a current market cap of £3.39m.

In the latest Accountancy Age Top 50 survey RSM Tenon had a fee income of £207m, a 12% decline on the year before. Baker Tilly were unable to submit new fee income but re-stated its 2012 figures of £171m for the year ended 31 March 2012.

Many in the profession believe that it was only a matter of time before the mid-tier firms would have to begin merging. Earlier this year BDO announced it would merge with PKF, allowing it to gain ground on rival Grant Thornton.

As revealed by Accountancy Age earlier this year, Tenon is looking to relocate about 600 staff from its London office, after the local council granted planning permission to remodel the building it currently occupies. It is expected that work will commence next year.

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