Clayton, Dubilier & Rice is considering sweetening its offer for London-listed UDG Healthcare even after the company’s board backed a lower bid, the second time in two days that a buyout group has taken the step in the wake of shareholder resistance.
The US-based private equity firm has indicated it could raise its bid for the UK healthcare company to £10.80 per share, giving it an enterprise value of £2.9bn including debt, up from £2.8bn as per the original offer agreed last month.
The potentially higher bid comes after “discussions with certain UDG shareholders”, the healthcare group said on Friday.
After the deal was announced last month M&G Investments, a top-10 shareholder, said the offer “fails to offer fair value to ordinary shareholders”, while Allianz Global Investors, its largest shareholder, said the offer was “opportunistic and significantly undervalues UDG”.
Shareholders were due to vote on the bid on Friday but the vote has been adjourned in light of the discussions with shareholders and the potentially higher offer.
It is the latest sign of shareholder discontent over private equity buyouts of UK-listed companies. On Thursday Blackstone raised its offer for developer St Modwen Properties by 3 per cent even though the company’s board had backed a lower bid, after some shareholders said the original price was too low.
It comes amid a fierce row between traditional fund managers and private equity groups as the latter target UK-listed companies at the fastest pace in more than two decades, sparking concerns that FTSE-listed businesses are being sold off too cheaply.
UDG’s board last month announced it had agreed a £10.23 offer with CD&R. The UK group, which provides clinical, commercial, communication and packaging services for the healthcare industry, will set a new schedule for shareholder approval if an increased bid is tendered.
The board has indicated to CD&R that it intends to recommend the higher offer if it is made. The buyout firm said it was in talks with certain shareholders to garner their support.
The CD&R offer price could climb higher still if a rival bid is made, the companies said.
Shares in UDG rose 1 per cent to £10.57 in morning trade.
AllianzGI declined to comment on the potentially higher offer. M&G could not be reached for comment.
Merger & acquisition activity in the UK pharmaceuticals and healthcare sector has been accelerating. Ramsay Health Care last month agreed to buy Spire Healthcare to create the UK’s largest private hospital group, while private equity’s Carlyle snapped up London-listed inhaler specialist Vectura, both in £1bn deals.
The sector is considered resilient to downturns and well placed to benefit from demographic changes such as ageing populations.