Private equity company buys DX Services for €501m

DX Services, the mail business, is to be bought by Candover Partners, the private equity firm, for £348.7 million (€501 million).

The offer of 415p a share in cash represents a 26 per cent premium to the closing share price of 330½p on July 3rd, the day before the company announced it had received an approach from an unidentified party.

DX Ireland, which operates a document exchange service, that delivers more than 10 million items annually on behalf of 4,000 Irish customers including A&L Goodbody solicitors, Bank of Ireland and several Government departments, is a subsidiary of DX Services. Earlier this week, DX Ireland announced it had postponed starting a postal delivery service to rival An Post until after the postal market was fully liberalised, saying it was not currently financially viable.

Candover's acquisition represents a direct challenge to the Royal Mail Group, as the private equity firm plans to merge DX with Secure Mail Services, a postal company that delivers time-sensitive documents.

Candover is buying SMS, which delivers cheque books and credit cards to consumers, from Baring Private Equity for an undisclosed sum.

"In the wake of recent postal industry deregulation, the enlarged group will be well positioned as customers consider a move to use alternatives to Royal Mail," Candover said.

DX delivers about 250 million items a year mainly to businesses, while Secure Mail delivers to about 18 million residential addresses. The enlarged group will have a combined turnover of £175 million and 1,840 employees.

James Greenbury, SMS chief executive, will take over as chief executive of the enlarged business, leaving DX chief Paul Kehoe, who joined the group last year, to run the DX arm.

Mr Kehoe said: "There is great logic to this deal as DX is business to business and SMS is business to consumer. James got there first [as chief executive of the new group] and I am happy to support him in the short-to-medium term. But I am taking no stake in the new business."

One analyst said: "On first glance its a generous price and a reasonable premium but a few people are surprised at the timing."