UPDATE 4 — Edinburgh-based John Menzies said it was in discussions over the potential sale of its distribution arm to much smaller delivery firm DX Group in a reverse takeover following pressure from shareholders to separate the division from its airport services business.

If a deal went through, Menzies shareholders would own at least 75% of DX’s issued share capital and Menzies Distribution managing director Greg Michael and finance director Paul McCourt would become group chief executive officer and chief financial officer of DX.

Menzies has had a tumultuous two years, with major changes in its executive ranks and pressure from major activist shareholders to split its business in two.

“It is currently envisaged that the transaction would be effected by DX acquiring Menzies Distribution for consideration, on a cash and debt free basis, comprising £60 million in cash and the issue of new DX ordinary shares representing 80% of DX’s issued share capital as enlarged by the transaction,” said Menzies.

“The cash consideration will be satisfied by new borrowings by the enlarged group.”

Menzies’ shares rose as much as 7% to around 680p to give it a stock market value of roughly £550 million.

“The boards of DX and John Menzies currently anticipate the transaction will be completed during the summer of 2017,” added Menzies.

“Discussions are ongoing and there can be no certainty that a transaction will occur.”

German activist investor Shareholder Value Management (SVM), one of the major Menzies shareholders that had been applying pressure for a split in Menzies’ business after taking a 7% stake in the Edinburgh firm, told Reuters it was “happy” with the structure of the deal.

SVM had successfully pressured Menzies into hiring packaging industry tycoon Dermot Smurfit as its chairman.

“Dermot’s actions as chairman over his short tenure have been exemplary,” SVM director Gianluca Ferrari told Reuters, describing the planned deal as an “important milestone” for Menzies.

DX Group’s shares have fallen about 90% since the firm listed in 2014 and activist investor Gatemore Capital Management, one of DX’s major shareholders with an 11% stake, told Reuters it was unhappy with the proposed deal.

“This is trying to tack on a complementary business,” Gatemore chief investment officer Liad Meidar told Reuters.

“What DX needs to do is improve its service quality and operations.

“It seems like an egregious case of the board … force-feeding a deal which is not in the best interest of shareholders … I think there are other(s) who will view this as we do.”

On March 8, John Menzies said its 2016 turnover rose to just more than £2 billion from £1.99 billion in 2015 and profit before tax edged up to £19.8 million from £18.2 million as its chairman declared the firm was “back on track after a period of underperformance.”

Menzies last month completed the acquisition of Orlando, Florida-based aviation and fuel services company ASIG from BBA Aviation for $202 million.

“The boards of DX and John Menzies believe that the combination would benefit the customers of DX and Menzies Distribution through the creation of a logistics and parcel carrier of enhanced scale and capability operating through a 24 hour UK wide logistics network,” said Menzies.

“Based on a preliminary joint assessment, the boards of DX and John Menzies estimate that the combination would generate cost synergies in the range of £8 million to £12 million per annum.”