John Menzies has called off talks with DX Group after carrying out deeper due diligence following DX's profit warning last month.
While Menzies still sees strategic merit in the combination of Menzies Distribution and DX, this further due diligence revealed that the deal would need to be completed on revised terms.
As such, despite further discussions after the profit warning, "the John Menzies board does not believe it is currently possible to agree a revised set of terms with DX for the combination which would be in the interests of John Menzies shareholders.
"John Menzies has therefore terminated discussions with DX," it said on Monday.
DX PLANS BOARD RESHUFFLE
DX chairman Bob Holt said he as part of a "transformation" of DX a number of changes were planned to strengthen the board, including the appointment of Ron Series as chairman designate, with Paul Goodson, Russell Black and Lloyd Dunn proposed as non-executive directors.
Holt, who will lead these changes after which he intends to retire from the company, said while both sets of shareholders were keen on a deal, "it has become clear that we would not be able to agree terms that would be acceptable to our shareholders and since we have a strong alternative business transformation plan in place, we have decided that it is the best interests of our shareholders for us to pursue this course.
"Our major shareholder and our bankers are supportive of the proposed plans for the business on a stand-alone basis and we have been exploring new financing options with our bankers."
As suitable terms could not be agreed with Menzies, he said the DX board "believe a stand-alone strategy is the right course for our shareholders and we are on the front foot with plans for business transformation and recovery".
Shares in Menzies were up 2p to 705p, while DX remained suspended.
Broker Shore Capital said: "Many investors were likely to be disappointed that the split of Menzies Aviation and Menzies Distribution will not occur imminently.
"However we would remind investors that the agreement on the pension fund that removed the most significant barrier to a split still stands and therefore we ultimately still expect the businesses to split at some point and in a value creative manner."