US private equity group Clayton Dubilier & Rice (CD&R) says it is considering increasing its offer for UDG Healthcare after leading shareholders said the bid undervalued the company.
CD&R said yesterday that after talks with some UDG shareholders it was considering raising its bid to £10.80 per share from an offer £10.23.
That would lift the overall price for UDG to about £2.7bn (€3.15bn) from £2.6bn.
On May 12, CD&R and UDG said they had agreed on the terms of a cash offer, which was unanimously recommended by the board of UDG.
However, Allianz Global Investors, which is the largest shareholder in UDG, said the £2.6bn bid for the London-listed health services company was “opportunistic and significantly undervalues UDG and its prospects”.
M&G Investments, another top 10 shareholder in the company, was also critical of the initial bid.
Bidco – an affiliate of CD&R – has since held discussions with “certain UDG shareholders” and says it is considering an improved and final offer.
UDG said in a statement that the higher possible offer price would not be increased unless another bidder emerges.
The Dublin-based company said it is not in discussions with anyone else about a takeover offer.
The board of UDG has indicated to Bidco that if the increased final offer is made it intends to recommend it to shareholders.
Under the terms of the bid, which is being implemented by way of a Scheme of Arrangement, CD&R would have needed to get 75pc approval from voting shareholders in UDG at an extraordinary general meeting (EGM).
Since the bid initially emerged, activist investor Elliott Investment Management has bought a 3.1pc stake in UDG, adding to pressure for a higher offer.
UDG had been due to hold a Scheme Meeting and EGM in respect of the initial bid yesterday, which was adjourned following the revised offer.
“The announcement points, in our view, to some finality in the offer process for UDG and thus is likely to result in the acquisition of UDG by CD&R at £10.80 per share,” Gerry Hennigan, analyst at Goodbody, said.
The proposed transaction, if it were successful, would reunite former UDG chief executive Liam Fitzgerald with the company he ran from 2000 to 2016 and grew from an Irish-based distribution business into a more diversified and international healthcare services provider.
Now an operating advisor for CD&R on European healthcare, Mr Fitzgerald is chairman of Huntsworth, a provider of commercialisation services for pharmaceutical and biotech companies that CD&R bought last year and intends to merge with UDG’s Ashfield division.
UDG was founded as United Drug Chemical by a group of pharmacists in Ballina, Co Mayo in 1948.
It listed on the Irish Stock Market in 1989.
It purchased Ashfield Healthcare in 2000, which marked its entry into the contract sales market in the UK and Ireland.
In 2012 the company moved its listing from the Irish Stock Exchange to the London Stock Exchange.
Shares in the company were up just over 1pc in afternoon trading in London yesterday.