One of the largest energy businesses listed on the London Stock Exchange, DCC Energy, has agreed to a £5.75 billion takeover bid from US private equity groups KKR and Energy Capital Partners. The move, which sees the company's board recommend the offer, has ignited controversy, drawing strong criticism from DCC's founder and largest shareholders.
The proposed acquisition of the Dublin-based firm involves the private equity consortium offering £65.25 per share in cash for DCC, which specialises in supplying liquid gas and fuels across Europe and the US. An additional sweetener of £1.25 per share has been included, contingent on the successful sale of DCC's technology division, Nexora, reaching a specific valuation. This cash offer represents a 36% premium over the company's average share price in the three months preceding the public disclosure of takeover talks.
However, the deal has met with significant resistance. Jim Flavin, DCC's founder and a major shareholder, expressed his astonishment at the board's endorsement, stating he believes the offer 'totally inadequate'. Flavin highlighted the company's updated strategy from 2022, which aimed to double operating profits to £830 million by 2030, suggesting the takeover price fails to reflect this future potential. Pension funds Aviva and Fidelity, also significant stakeholders, have voiced similar concerns. Matt Bennison, head of UK active equities at Aviva Investors, stated last week that the takeover would 'represent a bad outcome for shareholders' and indicated Aviva would not support the deal.
This latest private equity acquisition contributes to a growing trend of UK-listed companies being taken private, following similar agreements for firms such as Mitie, Tate & Lyle, and William Hill owner Evoke. The budget airline easyJet is also reportedly subject to a possible £5.7 billion offer. This exodus from the London Stock Exchange has raised concerns about the attractiveness of the UK market for publicly traded companies and its impact on investor choice.
For UK households and businesses, the direct impact of DCC Energy going private may not be immediately apparent, as the company primarily operates in business-to-business energy services. However, the broader trend of UK companies being acquired by private equity could signal a perception of undervaluation in the UK market, potentially influencing investor sentiment towards other listed firms. While DCC's board maintains the offer provides a 'compelling and certain opportunity' for shareholders to 'realise value in cash today', the disagreement among key stakeholders underscores the complexities and differing views on company valuation in the current economic climate.