Veterinary pharmaceuticals group Dechra (DPH) has backed a £4.5bn buyout by the Swedish private equity firm EQT. The board has recommended the offer of 3,875p per share, a 44 per cent premium to the closing price of 2,690p on 12 April, the day before EQT declared its interest.
The buyout group initially tabled an offer of 4,070p per share for Dechra, which was denounced by several institutional shareholders as “opportunistic”. But Dechra has since issued a profit warning following a pattern of destocking by UK and US wholesalers.
Management stated on 22 May that underlying operating profit for the year ending 30 June would be materially lower than the £186mn it guided for in its interim results. The company declined to say how much lower it expects profits to be.
Over three-quarters of shareholders need to back the deal. That looked unlikely before the trading update but investors may now be spooked into voting yes.
“While we think in the longer term shareholders would be better not to accept the offer, we believe the deterioration of the business is probably worse than we had forecast… given the board is prepared to accept a 4.8 per cent reduction to the original possible offer price from EQT,” analysts from investment bank Stifel said.
Analysts at Numis said that it’s likely that the deal will be supported by shareholders in light of the “somewhat unquantifiable downgrade” to its full year profit forecast. It’s expected that the acquisition will be completed by the end of this year or the start of 2024.
Elizabeth Platt, the chair of Dechra, said EQT is a group of “highly experienced investors with a strong sector understanding who will, we believe, prove to be responsible and supportive owners”. Markets were also seemingly pleased with the takeover announcement, with Dechra’s shares rising nearly 9 per cent in early trading this morning.
