- EQT trims bid price on lowered outlook
- Swedish investor a specialist in healthcare
- Price still represents a 44% premium
Shares in FTSE 250 veterinary drug maker Dechra Pharmaceuticals (DPH) gained 8% to £36.45 after the firm agreed a final bid from Swedish investor EQT.
The bid, at £38.75 per share, is lower than the previous price of £40.70, but still represents a 44% premium to the undisturbed share price on 12 April, the day before EQT made its initial approach.
RATIONALE FOR THE BID
Dechra is ‘a high quality and leading company operating in the attractive animal health pharmaceuticals market, which is expected to benefit from numerous long-term growth drivers including positive demographics, increasing pet ownership, medical innovation and greater focus on animal care within the family’ according to EQT.
The firm has ‘an attractive portfolio of products and pipeline and is perceived as a leading specialist by vets and customers in the market segments in which it operates’ and is led by ‘a high quality and experienced management team, with a clear vision and strategy for the future direction of the business.’
EQT says it is ‘well positioned to support Dechra's next phase of growth by virtue of its insights and understanding developed from existing and former investments across the animal health value chain.’
The Swedish firm, whose investors include pension funds, sovereign wealth funds, private wealth firms and foundations, mostly buys businesses in the healthcare, energy and technology sectors in Europe and the US.
WHY ACCEPT A LOWER BID PRICE?
Dechra’s board agreed the lower bid after it had to lower its full year profit forecast last month due to de-stocking issues in the US and the UK.
Having issued solid interim results and upbeat guidance in February, the firm had to backtrack due to a ‘more volatile and challenging’ trading environment than it anticipated in March and April, largely due to de-stocking by US wholesalers which turned out to be deeper and longer than expected, impacting third-quarter earnings.
The situation in the US was replicated in the UK as wholesalers managed their year-end inventory levels, while in continental Europe the firm said the market ‘appears to be slowing in response to the changing macro-economic environment and country specific dynamics’.
While the 44% premium on offer may not please everyone, the bid price is still higher than the shares have traded at any point since April last year.
