UDG shareholder blasts sale to private equity firm

M&G Investments, the £367 billion (€427 billion) asset manager, has blasted plans to sell London-listed UDG Healthcare to buyout firm Clayton, Dubilier & Rice, the latest in a series of criticisms of private equity deals by big fund managers.

Shareholders are due to vote in June on the £2.8 billion (€3.25 billion) all-cash offer to sell UDG, which provides clinical, commercial, communication and packaging services for the healthcare industry.

But London-based M&G, which is a top-five shareholder in UDG according to data provider CapitalIQ, said the bid “fails to offer fair value to ordinary shareholders, including the customers on whose behalf we invest”.

Allianz Global Investors, UDG’s largest shareholder, has also criticised the deal. Earlier this month, Elliott Investment Management, the activist investor, said it had taken a stake in the Dublin-headquartered company.

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The criticism by M&G and AllianzGI comes at a time of growing concern in the UK that listed companies are being sold off too cheaply to private equity firms.

While fund managers rarely make public statements on companies, some have decided to speak out about deals involving private equity in recent weeks, including Schroders, which criticised transport operator FirstGroup’s planned £3.3billion sale of its US business to Swedish buyout group EQT.

Private equity groups, many of which have raised their largest-ever funds, are targeting the British stock market with the aim of capitalising on lower valuations in the wake of Brexit and the pandemic.

Thirteen private equity buyouts of British-listed companies have been announced since the beginning of 2021, the highest year-to-date figure since 2006, according to figures from Refinitiv. Just two were announced during the same period in 2019.

Rory Alexander, a fund manager at M&G, said he was concerned that CD&R would benefit from the UDG deal at the expense of ordinary investors.

“The $3.7billion offer does not reflect the potential long term value creation of UDG’s organic growth story, opportunity for strategic acquisitions, consistent cash generation and fortress balance sheet,” he said.

“The material mismatch between the offer price and our opinion of UDG’s true value represents upside transferred away from ordinary shareholders towards the private equity bidder.”

UDG declined to comment. But when the deal was announced on May 12th, UDG chair Shane Cooke, said it was an “attractive offer”. He added that it “secures the delivery of future value for shareholders in cash today. The offer reflects the quality, strength and long term performance of UDG’s businesses and its future growth potential”.

CD&R declined to comment.

AllianzGI, which owns 8.6 per cent of UDG’s shares, said earlier this month that the price did “not adequately compensate existing shareholders”, adding that it was the duty of the board to “obtain a fair value for shareholders”.

“AllianzGI firmly believes that the offer is opportunistic and significantly undervalues UDG and its prospects and is not in the best interests of shareholders. Consequently, based on available information, AllianzGI is minded not to accept the current offer despite it being recommended to shareholders by the Board of UDG,” it added.

- The Financial Times Limited