DCC Energy Agrees to £5.75bn Takeover by KKR and ECP
The company's board recommended the offer, but its founder and major shareholders object.
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DCC Energy, a significant player in the supply of liquid gas and fuels across Europe and the United States, has agreed to be acquired in a £5.75bn deal. The agreement sees US private equity groups KKR and Energy Capital Partners poised to take control of the company. The board of DCC Energy has advised its shareholders to accept the offer.
Shareholder Objections Surface
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Despite the board's recommendation, the proposed takeover has met with significant opposition. Jim Flavin, the founder of DCC Energy and a major shareholder, has voiced strong objections. Mr Flavin stated he was "astounded" by the board's support for the deal, which he believes does not reflect the company's true worth. He pointed to the company's 2022 strategy, which aimed to double operating profits to £830m by 2030, suggesting the current offer is inadequate.
Other substantial shareholders, including pension companies Aviva and Fidelity, have also expressed concerns. Matt Bennison, head of UK active equities at Aviva Investors, indicated that the offer would be a "bad outcome for shareholders" and that Aviva would not support the deal if the board recommended it. He further stated that the increased offer was "unsurprisingly not enough" and not in the interest of their clients to sell at the proposed level.
Deal Structure and Valuation
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The cash offer from the private equity consortium amounts to £65.25 per share. This figure is reported by The Guardian to be 36% higher than DCC Energy's average share price over the three months preceding the public announcement of takeover talks. The board of DCC Energy stated that the offer provides a "compelling and certain opportunity" for shareholders to "realise value in cash today". The offer was enhanced with an additional £1.25 per share sweetener, contingent on the sale of DCC's technology division, Nexora, achieving a specific price.
The agreement for DCC Energy to be taken private adds to a trend of UK-listed companies being acquired by private equity firms. Other recent examples include Mitie, Tate & Lyle, and the owner of William Hill, Evoke. The budget airline easyJet is also reportedly subject to a potential £5.7bn offer.
Questions this report answers
+Who is behind the £5.75bn takeover of DCC Energy?
The takeover is led by US private equity firms KKR and Energy Capital Partners. They have agreed to pay £5.75bn in cash for DCC Energy, which operates in liquid gas and fuels supply across Europe and the US.
+Why are some shareholders unhappy with the takeover offer?
Founder Jim Flavin and major shareholders argue the £65.25 per share offer undervalues the company. They point to DCC Energy’s 2022 plan to double operating profits to £830m by 2030, suggesting the offer does not reflect its true potential.
+What extra incentive was added to the takeover offer?
The private equity consortium sweetened the deal by adding £1.25 per share if DCC Energy’s technology division, Nexora, achieves a specific sale price. This conditional bonus aims to make the offer more attractive to shareholders.
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