ISG blunders in takeover defence

ISG has been required to put out a revised shareholder circular as it defends itself from takeover from US investor Cathexis.

The firm’s board originally wrote to shareholders on 23 December setting out its reasons for rejecting Cathexis’ offer of £1.43 per share and urged shareholders to do so as well.

The revised circular was required after investment analyst forecasts for 2016 and 2017 were referenced in the previous document.

Under the Takeover Code “reference by an offeree company to an investment analyst forecast constitutes a profit forecast by the company itself”. These profit forecasts must also be backed up by the company’s accountants and director.

However, ISG said it “is not able to comply with these requirements,” requiring the issue of a revised document.

“Shareholders should rely only on the revised circular in reaching any conclusions on the merits of the offer (and, in particular, shareholders should not place any reliance on the consensus forecasts for ISG for 2016 and 2017 set out in section 3.1 of the original circular since ISG has not been able to substantiate these forecasts),” ISG said.

“In all other respects the board, which has been advised throughout by Numis, stands by its rejection of the offer,” the firm added.

Cathexis made its offer of £1.43 per share on 19 December, a 17% premium on ISG’s closing share price at the time, valuing the company at £71m.

ISG’s board – led by chief executive David Lawther – has labelled the offer “inadequate” saying it “fails to reflect the recent growth and future potential of ISG’s core fit-out businesses”.

The board also accused Cathexis of being an “astute investor which has bought its ISG shares at times when the share price has been low and now sees further value in ISG shares at shareholders’ expense”.

“Cathexis is not paying an adequate premium for control of ISG and the dividend is at risk if it seizes control of ISG,” ISG’s board added.

Cathexis already owns around 30% of ISG’s shares and intends to take the firm private and has argued that “due to the size of the company, the nature of its business, the cyclicality of its markets and the volatility of its share price and trading performance” it is better suited to private ownership.

ISG previously rejected an offer from Cathexis in June 2015.