Top investors oppose £5.7bn private equity bid for energy group DCC
Offer from KKR and Bridgepoint subsidiary fails to win support from Ninety One, Aviva Investors and Fidelity International
Major shareholders have opposed a £5.7bn takeover of DCC by private equity firms, warning that the bid significantly undervalues the FTSE 100 energy firm’s growth prospects.
US private equity group KKR and Energy Capital Partners, a subsidiary of London-listed Bridgepoint, last month increased their bid for Dublin-headquartered DCC to £65.25 a share in cash plus £1.47 in dividends.
But even though DCC’s board said it would be minded to recommend the offer to shareholders, which was increased from the previous offer of £58, top investors have come out against the proposed deal.
Alessandro Dicorrado, a UK equity manager at Ninety One, a top shareholder, told the FT on Friday that he opposed the bid, adding: “I don’t like the price on DCC.”
Matt Bennison, head of UK equities at Aviva Investors, a top 10 shareholder, said the proposal “significantly undervalues” the business and that the asset manager “would be disappointed if the DCC board were to recommend an offer for the business at the level of £65.25 per share”.
“DCC is a company with many appealing characteristics — a strong and growing platform with a high return on capital and attractive cash generation. As a result, it is no surprise to see it receiving interest from potential acquirers.”
London-listed DCC, whose main markets are in Europe and the US, provides off-grid energy solutions such as liquid gas, while operating service stations and fleet services.
But any deal would mark the latest big departure from the London Stock Exchange in another blow to the country’s capital markets, following a series of private equity takeovers and defections to US exchanges.
Bennison said DCC’s “strong fundamentals mean that the company has multiple levers through which it can create significant value for existing shareholders over the coming years — organic growth, inorganic growth as well as an ability to return significant amounts of excess cash to shareholders via dividends and ongoing share buybacks”.
Alex Wright, UK equity fund manager at Fidelity International, one of DCC’s biggest investors, said that “we do not believe the revised proposal from the consortium adequately reflects our fair value of DCC and its long-term growth prospects”.
He added in comments made a few days ago that market sentiment “has been weak, largely due to previous concerns around the structural decline of its fossil fuel distribution business”.
Wright said “these fears are overdone” and that DCC’s “attractive valuation makes it stand out as a compelling recovery opportunity”.
DCC declined to comment.