One of the biggest energy businesses listed on the London Stock Exchange has agreed a controversial £5.7bn takeover by private equity, adding to the growing exodus of companies from the UK market.
The US private equity groups KKR and Energy Capital Partners are poised to buy DCC Energy after the company’s board recommended the offer despite misgivings from its founder and biggest shareholders.
The proposed takeover of the Dublin-based company follows recent agreements to take a host of UK businesses private, including Mitie, Tate & Lyle and the William Hill owner, Evoke. The budget airline easyJet is subject to a possible £5.7bn offer.
The potential blow to the LSE has already attracted criticism from DCC’s founder, Jim Flavin, who is one of the company’s biggest shareholders, and the pension companies Aviva and Fidelity, which also hold significant stakes in the company.
Flavin said he was “astounded” by the board’s backing for the deal, which he believes undervalues the off-grid energy services supplier after its updated strategy in 2022 set out an aim to double its operating profits to £830m by 2030.
“Why would the board go along with such a charade? I regard this price as totally inadequate,” Flavin said.
The board gave its approval to the private equity consortium’s offer to pay £65.25 a share in cash for DCC, which supplies liquid gas and fuels in Europe and the US, after the bidders also agreed to add a £1.25 per share sweetener on the condition that the ongoing sale of DCC’s technology arm, Nexora, reached a certain price.
The cash offer was 36% higher than the company’s average share price over the three-month period before the takeover talks became public. But it has failed to win over shareholders.
Matt Bennison, the head of UK active equities at Aviva Investors, said last week that the takeover would “represent a bad outcome for shareholders” and Aviva would not support the deal if the board chose to recommend it.
“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,” Bennison said. DCC’s board said the offer “represents a compelling and certain opportunity” for the company’s shareholders to “realise value in cash today”.
DCC shares edged up just more than 1% to £63.60.