Takeover Agreement
DCC, one of the largest energy businesses on the London Stock Exchange, has agreed to a £5.75bn takeover by US private equity groups KKR and Energy Capital Partners. The board recommended the offer despite misgivings from the company's founder and biggest shareholders.
The Dublin-based company's proposed acquisition follows a trend of UK businesses being taken private, including Mitie, Tate & Lyle, and Evoke. Budget airline easyJet is also subject to a possible £5.7bn offer.
Shareholder Opposition
Founder Jim Flavin, a major shareholder, expressed astonishment at the board's backing. He believes the deal undervalues DCC, which aimed to double operating profits to £830m by 2030 under a 2022 strategy. "Why would the board go along with such a charade? I regard this price as totally inadequate," Flavin said.
Pension companies Aviva and Fidelity, also significant stakeholders, have criticized the deal. Matt Bennison, head of UK active equities at Aviva Investors, stated last week that the takeover would "represent a bad outcome for shareholders" and Aviva would not support it. He added, "This 'increased' offer, a very modest increase to that, is unsurprisingly not enough. We firmly believe that [it] is not in the interest of our clients to sell the business at this level."
Offer Details
The private equity consortium offered £65.25 a share in cash, with an additional £1.25 per share conditional on the sale of DCC's technology arm, Nexora, reaching a certain price. The cash offer was 36% higher than the average share price over the three months before talks became public. DCC's board said the offer "represents a compelling and certain opportunity" for shareholders to "realise value in cash today." DCC shares edged up just over 1% to £63.60.
