UDG attracts private equity suitor

Shares in UDG Healthcare (UDG) rose more than a fifth on Wednesday morning as it emerged that a US private equity firm had swooped in on the FTSE 250 company.

Clayton, Dubilier & Rice (CD&R) is offering 1,023p a share to buy Dublin-based UDG, constituting a premium of 21.5 per cent to the shares’ closing price the day prior to the bid announcement.

The offer sits at a 30.3 per cent premium to UDG’s volume weighted average price over the past six months. It also tops UDG’s all-time high closing price. In total, CD&R’s proposed deal values the healthcare services group at £2.6bn, with an enterprise value (EV) of £2.8bn.

UDG management has recommended the takeover offer. The group has “transformed since disposing of its supply chain business in 2015, through a combination of sustained long term organic growth and strategic bolt on acquisitions”, said chairman Shane Cooke.

But while the board “remains confident in the long term fundamentals of the group”, it believes that the offer is “attractive” and “secures the delivery of future value for shareholders in cash today”.

UDG’s outsourced services operations span healthcare advisory, marketing, communications and packaging services among other areas. It employs 9,000 people across 29 countries.

The news of CD&R’s intended takeover came as UDG posted numbers for the year ending 31 March. Revenues dipped 5 per cent to $661m while pre-tax profits edged up 5 per cent to $65.1m

The intended takeover is subject to regulatory clearances and investor approvals. UDG’s directors have irrevocably undertaken to vote in favour of the acquisition, although their shares amount to just 0.16 per cent of the total.

Another shareholder, Kabouter Management, has also written a letter of intent to CD&R to vote in favour of the scheme. Kabouter’s stake represents 5.5 per cent of UDG’s total share capital.

Analysts at brokerage Stifel reckon the offer from CD&R is “strong” and “unlikely to be countered”.