UDG bidder’s increased €3.2bn offer wins over key dissident investor

Clayton Dubilier & Rice bid representss 5.6% increase on proposal made last month

UDG Healthcare confirmed on Tuesday that US private equity group Clayton Dubilier & Rice (CD&R) has hiked its takeover bid for the Dublin-based group to £2.76 billion (€3.2 billion), securing the backing of a major shareholder that came out against an original offer.

The fresh bid of £10.80 per share marks a 5.6 per cent increase on a previous proposal made last month, UDG said, adding that it plans to put the offer before shareholders at an extraordinary general meeting on or around July 22nd.

Allianz Global Investors, which owns almost 8.6 per cent of UDG and rejected the original offer as "significantly" undervaluing the London-listed group, has committed to support the improved terms. Another investor, Kabouter Management, with a 2.7 per cent stake, is also backing the deal, UDG said.

CD&R, where former UDG chief executive Liam FitzGerald is a deals adviser, signalled on Friday morning that it planned to increase its offer, as it became clear that the initial proposal was going to run into trouble at a key shareholder meeting hours later.


Bid opposition

However, M&G Investments, another top UDG investor that had opposed the original bid, has signalled that it does not intend to vote in favour of the new proposal. Rory Alexander, a fund manager at M&G, which owns 2.6 per cent of UDG, said on Friday that £10.80 "would still fall short" of its expectations.

US hedge fund Elliott Investment Management, which cropped up on UDG's shareholder register with a 3.2 per cent stake last month in a clear effort, according to market observers, to push CD&R higher, has not made its views known.

Established in 1948 in Ballina, Co Mayo, as United Drug Chemical Company, a co-operative controlled by a group of pharmacists to secure a reliable supply of medicines, the company has long shed its roots and generated less than 0.4 per cent of its $1.15 billion (€960 million) total sales in the Republic last year.

The company floated on the stock market in 1989 but abandoned its Irish listing in 2012 for a primary quotation on the London Stock Exchange.

The business went through a transformational year in 2016 when it sold its legacy Irish wholesale business and UK-based travel healthcare operation, for €407.5 million.

UDG is now concentrated on two businesses: Ashfield, which provides major drugmakers with outsourced services such as sales reps and healthcare communications; and Sharp Packaging, a provider of outsourced healthcare packaging in an increasingly regulated field for drug serialisation.

Mr FitzGerald presided over much of UDG’s evolution and international expansion as chief executive between 2000 and 2016, overseeing 30 acquisitions during his time. CD&R hired him in 2017 as an adviser to help drive healthcare investments.

UDG, which remains headquartered in Citywest Business Campus in west Dublin and is led by chief executive Brendan McAtamney, employs about 9,000 people in 29 countries.

Shares in UDG rose by 0.5 per cent in early trading in London on Tuesday to £10.71.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times