The US private equity consortium circling DCC has agreed to sweeten its maximum takeover proposal to £5.8 billion (€6.85 billion) subject to the subsequent sale of its technology unit, after the group’s board came under pressure from some top shareholders to secure a better offer.
However, Goodbody Stockbrokers analyst Kenneth Rumph said that the improvement “is smaller than some market participants would have wanted” and could cast doubt over shareholder acceptance.
Energy Capital Partners and KKR have pitched that DCC shareholders receive as much as £1.25 extra per share if they achieve at least $800 million (€697.6 million) from a sale of the tech division, known as Nexora. It marks as much as a 1.9 per cent improvement on the previous proposal.
“If the net proceeds are below $800 million, the amount payable under the Nexora proceeds adjustment would reduce (potentially materially) progressively down to zero,” DCC said in a statement on Thursday as the US suitors were granted a fourth deadline extension, until 5pm on July 27th, to at least confirm a firm intention to make a formal bid.
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DCC said that the consortium has confirmed that “confirmatory due diligence has been completed and definitive transaction documentation has been substantially agreed”, except for elements around proceeds from the sale of the technology business, known as Nexora.
“The precise terms of the Nexora proceeds adjustment are still to be agreed between the parties and will be subject to discussions with the Irish Takeover Panel,” it said.
The takeover proposal also includes a payment of a £1.47 dividend that had already been proposed by DCC and due to be voted on at an annual general meeting (agm) on Thursday. However, that dividend is currently due to be paid out on July 23rd, before the bid deadline expires.
DCC’s board had signalled last month that it was “minded to recommend” the previous proposal, which marked a 15 per cent improvement on one that was rejected in April.
But even the latest offer is unlikely to appease the major shareholders that have come out against the sale in recent weeks. DCC’s largest shareholder, Fidelity International, with a 6.9 per cent stake, said two weeks ago that the bid failed to reflect DCC’s real value and that it “would not accept anything below £70 in cash per share”.
DCC’s founding, Jim Flavin, who retains a 3.2 per cent stake 18 years after resigning as executive chairman, has spoken to a number of publications, including The Irish Times in the past week, calling on the board to resist the temptation to sell, double down on delivering its growth plan, and aspire to become a “world leading multi-energy solutions company”.
Flavin said that if DCC is to be sold, the board should hold out for an offer of at least £100. He estimates that the current offer on the table values the key energy business at “only 10.8 times” expected earnings for the current year, which is “a ludicrous valuation”. He said that “a more reasonable” multiple of 16.5 times.
DCC, whose businesses once spanned Robert Roberts tea and coffee to waste management, decided in late 2024 to abandon its conglomerate roots by putting its then healthcare division on the market and signalling a strategic review of its technology unit that would also eventually lead to it being put up for sale.
DCC sold its healthcare unit a year ago to private equity fund-owned HealthCo Investment for an enterprise value of £1.05 billion. It also offloaded part of its technology business, with the remainder of that division currently on the market.
The group plans to change its name to DCC Energy, subject to approval at the agm on Thursday afternoon. It said in a trading statement ahead of the meeting that the energy division was “trading ahead of the prior year” in its first fiscal quarter to the end of June, despite the conflict in the Middle East bringing forward some demand from customers into the previous quarter. The technology division was also doing better than the previous year, in line with expectations, it added.
