Private equity firm Aurelius has said it is backing out of its agreement to buy Connect Books because it can see “no way of financing this transaction”.
In a statement released by parent the Connect Group on Monday (22nd January), the Norwich-based wholesaler and distributor said it was “urgently” seeking clarification from Munich-headquartered Aurelius about its position, along with the legal basis for its U-turn on the £11.6m agreement, announced in December.
The German Federal Cartel Office gave its anti-trust approval to the acquisition last week (17th January), which was the only condition of the sale, the Connect Group said.
“Despite this, Connect Group has been notified by a letter received on Sunday 21st January 2018 stating, inter alia, that Aurelius Omega Ltd (the purchasing vehicle) ‘can no longer complete on the current terms (as we, the Directors of Aurelius Omega Ltd, can see no way of financing this transaction)’,” the statement said. “Connect Group has sought urgently to clarify Aurelius' position, including the legal basis, if any, upon which it purports not to complete on the transaction and we have reiterated in writing that Aurelius is legally obliged to complete the transaction on or before 31st January 2018. Further, Connect Group has reserved its right to pursue legal redress against Aurelius in light of this development.”
Justin Adams, managing director of Connect Books, told The Bookseller talks between the two companies broke down towards the end of last week, but said Aurelius’ move to back out was “unexpected”.
“Unfortunately at the end of last week, the parties hit an impasse and yesterday afternoon Aurelius formally informed Connect Group that they were unable to complete the proposed acquisition of Connect Books and finance the acquisition at the agreed terms,” Adams said. “This in turn required Connect Group to make a formal announcement. Connect is in discussion with Aurelius and seeking to clarify their position. Whilst these processes are always unpredictable this latest development was obviously unexpected.”
He added that in the meantime it was “business as usual” for staff and customers and Connect Books remained part of Connect Group PLC. “(We) continue to work to meet our customers and publishers needs and requirements,” he said.
Connect Books, which includes wholesaler Bertrams, Dawson Books academic library supply arm and e-commerce retailer Wordery, was put up for sale in October with a price tag of £15m after Connect Group decided to concentrate on becoming a specialist logistics business.
Aurelius, a "pan-European" investor, with offices in Munich, London, Stockholm and Madrid, and listed on the Munich stock exchange, agreed to buy the company in December for "up to" £11.6m, which included an expected deferred consideration of £1.05m.
At the time, Dirk Markus, c.e.o. of Aurelius, said the acquisition was “a further demonstration of Aurelius’ position as a preferred partner for corporates seeking a complex carve-out of a non-core business” and it was “very much looking forward to working with Connect Book’s existing management to support the business in its next stage of growth".
Adams meanwhile said at the time: “In Aurelius I believe we have found an owner that has the financial and operational capabilities to help us on our journey to build the best one stop shop for content and support us in the ongoing shift towards becoming a more customer-centric, agile solutions provider for our customers and suppliers.”
Independent bookshops had also welcomed the news. Marie Moser, owner of the Edinburgh Bookshop, said at the time she was “very pleased”, as it means Connect Books will continue to operate. “It’s very good for the wider industry to have two major book businesses. It wouldn’t be at all healthy if Connect Books [and therefore Bertrams] folded and we only had Gardners. I’m really happy and its good news for suppliers and retailers.”
Aurelius declined to comment.