The US private equity firm Clayton, Dubilier & Rice has moved a step closer to its takeover of UDG Healthcare after raising its offer to £2.8bn and winning backing from big shareholders.
CD&R has increased its offer to £10.80 a share as signalled last week, after its earlier bid of £10.23 a share in May met opposition from some of UDG’s largest investors. The UDG board has recommended that shareholders accept the offer, and said it had not received any rival buyout proposals.
The FTSE 250 listed firm’s share price rose 0.5% to £10.71 on Tuesday, valuing the company at £2.7bn. Dublin-based UDG employs 9,000 people and provides advisory, communications, commercial, clinical and packaging services to the healthcare industry. It counts the top 30 pharma companies among its clients.
CD&R said that UDG’s biggest shareholder with an 8.6% stake, Allianz Global Investors, which had rejected the initial bid as too low, and another investor, Kabouter Management, had agreed to accept the higher offer. Allianz and Kabouter together own for 11.4% of the shares.
However, M&G, another top 10 shareholder, indicated last week that £10.80 a share would still fall short of its expectations. UDG said an extraordinary general meeting to vote on the deal, which had been postponed to allow for further negotiations, will take place on 22 July.
The New York hedge fund Elliott Management, a high profile activist investor which is currently pushing for change at the drugmaker GSK, acquired a 3.1% stake in UDG a few weeks after CD&R made its first offer.
New York-based CD&R, which is also seeking to buy the UK supermarket chain Morrisons, said it had a long track record of investing in healthcare companies. Last spring it paid £575m for Huntsworth, a firm that helps drugmakers commercialise new therapies, and appointed its adviser Liam FitzGerald, a former chief executive of UDG, as chairman.
A flurry of takeovers of UK businesses by private equity during the coronavirus pandemic has raised concerns about potential “asset stripping” and the ramifications for jobs and pensions. Private equity firms have announced 113 deals for UK companies (both takeovers and minority stakes) with a combined value of £23.3bn so far in 2021, according to the data company Dealogic.