System1 rejects fourth Brave Bison bid, says undervalues company

System1 Group PLC on Wednesday rejected Brave Bison Group PLC's latest takeover offer saying it still "materially undervalues" the company.

Shares in the London-based advertising and communications agencies moved in opposite directions on Wednesday morning, with Brave Bison falling 2.5% to 79.00 pence for a market capitalisation of £91.9 million, and System1 up 0.3% at 336.00p, for a market cap of £42.6 million.

On Monday, Brave Bison had announced its fourth bid for System1, with an implied value of 360 pence per System1 share, based on Brave Bison's 20-day-volume weighted average closing price of 94p per share on July 10. This implied an equivalent value of £47.5 million.

The offer included 135p in cash and 2.394 new Brave Bison shares per System1 share.

The all-share alternative consisted of 3.36 New Brave Bison Shares for each System1 share.

On Wednesday, System1 said the board "unanimously and unequivocally" rejected the bid, which did not offer fair value for all shareholders.

Shareholders representing a total of around 23% of System1 share capital supported its position. It said its three largest shareholders, excluding Brave Bison, had stated in writing that they have no intention of accepting the offer.

Shareholders in favour of the revised offer represent around 11% of System1's share capital, the company said.

System1 added that the offer represented a discount of 1.8% to System1’s closing share price of 335.0 pence per share on Tuesday.

It also noted that Brave Bison's share price decreased by 10.5% to 81.0 pence on Tuesday from 90.5 pence on July 10, reducing the implied value of the deal for System1 shareholders.

System1 said it was unconvinced by Brave Bison's strategic rationale and maintained that it was able to compete against well-funded rivals, work with artificial intelligence, accelerate product development and attract talent without being part of Brave Bison.

System1 said Brave Bison "does not have a marketing effectiveness platform and the board believes there is limited commercial overlap in the two businesses’ offering," undermining the logic supporting a merger.

System1 said the offer continues to be "opportunistic" as Brave Bison had bought its 28% stake in System1, on March 2, "not long before" System1 announced improved trading and outlook on March 16. Despite that, the offer does "not reflect the underlying momentum in the business or its wider strategic value."

System1 Chair Rupert Howell commented: "At a time when management should be focused on executing our strategy and delivering value, this prolonged and opportunistic approach is wasting management time, causing disruption to the business and incurring unnecessary costs for shareholders."

Brave Bison made its first takeover proposal in early June, offering 3.5988 Brave Bison shares, or around 297 pence, for each System1 share. After further dialogue, in July Brave Bison issued a cash-and-share bid of 2.7553 Brave Bison shares and 68 pence in cash, implying a value for System1 of 317 pence per share or £43.1 million.

System1 rejected both, saying they "materially undervalued" the firm and its prospects.

Brave Bison later that month tabled a fresh offer valuing System1 at 321.7p per share, comprising 135p in cash and 2.04 shares, followed by a revised offer implying a value of 307.4p per share, following a fall in Brave Bison's share price.

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