It seemed that UDG Healthcare would be just another Irish company to leave the market with barely a whimper when the group announced four weeks ago that US private equity giant Clayton, Dubilier & Rice (CD&R) had agreed had to buy it for £ 2.6 billion. Some observers even wondered why it had taken so long for the New York firm to knock since the man it hired as a consultant to sniff out health investments in early 2017 was former UDG CEO Liam FitzGerald. FitzGerald transformed the company formerly known as United Drug from an Irish-focused pharmaceutical distributor to an international healthcare services group while at the helm between 2000 and 2016. ServicesUDG’s main unit, Ashfield, which provides outsourced services such as sales force and health communications to major drug manufacturers, was acquired by UDG for € 21 million, possibly months before FitzGerald became CEO in late 2000, the company’s largest acquisition at the time. But FitzGerald was the driving force behind its further expansion through a series of deals. He opened up a further growth path in 2008 when UDG bought the US pharmaceutical packaging company Sharp for the equivalent of 62 million euros. And FitzGerald was at the helm in a $ 407.5 million deal to negotiate the sale of the group’s low-margin Irish wholesale business – a legacy of its founding in 1948 as a pharmacy cooperative in Ballina, Co. Mayo. It enabled his successor, Brendan McAtamney, to keep the checkbook open to buy more businesses that could be merged into his two entities. Under McAtamney, the company may have grown in size, with earnings before interest, taxes, depreciation and amortization (ebitda) up two-thirds. But the general strategy hasn’t changed. UDG’s board of directors should have suspected a year ago that CD&R might have its sights on the London-listed company when it acquired Huntsworth, a colleague from Ashfield, and appointed FitzGerald as chairman. After all, UDG’s own investor presentations listed Huntsworth as one of the leading competitors in what he believed to be a “fragmented market”. It’s not clear when CD&R took its first approach. But UDG said in documents related to the deal last week that it rejected an initial overture, forcing the private equity firm to come up with three more proposals before hitting the agreed price of £ 10.23 per share. This meant a premium of 21 percent on the closing price of UDG on the day before the announcement and was 30 percent above the average at which the shares had changed hands in the past six months. Closing priceIt was also nearly 7 percent higher than UDG’s all-time high closing price and rated the company at more than 17 times ebitda, which analysts at Jefferies consider “fair,” Stifel as “strong,” and Cantor Fitzgerald as “a very.” good price ”less than 12 times in view of its 10-year stock exchange trading average. This has unsatisfied a number of major shareholders, including Allianz Global Investors and M&G Investments, who have denounced the deal as undervaluing the company and rejected UDG chairman Shane Cooke’s logic that it is “the delivery of future value to shareholders secured in cash today ”. . The US hedge fund Elliott Investment Management has also appeared in the register of shareholders with a 3.2 percent stake, which is clearly trying to put pressure on CD&R to increase its offer at a time when the Covid-19 pandemic has broken out the health sector is one of the hottest areas for dealmaking. Together, the three investors own around 14.3 percent of the shares. The private equity fund aims to enforce the purchase via a so-called scheme of arrangement, which requires the approval of 75 percent of the shareholders with voting rights at an extraordinary general meeting on June 25th. UDG stock rose to as high as £ 10.78 after Allianz’s initial intervention three weeks ago and continued to trade above the offer price. Vanguard, one of the largest investment companies in the world and a nearly 4.7 percent stake in UDG, has also bought shares well above the offer price, suggesting that CD&R sees room for another return from CD&R, too, with sentiment. The major investor that the UDG originally had in its pocket to support the deal is also not to be expected to the extent hoped for. Chicago-based Kabouter management signed a letter of intent prior to announcing it would use its not inconsiderable 5.5 percent stake to vote for the sale. temptationIn the meantime, however, Kabouter has reduced its stake to 4.5 percent and has succumbed to the temptation to sell part of its stake in the active market. Just two weeks after the egm something has to give way. There is no indication that competing bidders want to enter. It would be difficult for a publicly traded company to justify a higher buyout multiple, according to Cantor FitzGerald analyst Ian Hunter. And few in the private equity world would be able to harness the synergies that a connection between Ashfield and Huntsworth offers. If CD&R went away, UDG’s shares could plummet to just over £ 8.40, according to Jefferies. Meanwhile, M&G, who has argued that there is a “material discrepancy” between its opinion of the true value of UDG and what CD&R has on the table, has also been in the market for the past few weeks – selling some of its stocks in between £ 10.49 and € 10.55. Is that any indication of where activist shareholders would be willing to support a deal? Or is someone starting to hedge their bets? Via https://dailyhealthynews.ca/who-will-blink-first-to-prevent-udg-healthcare-deal-flatlining/
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