EQT AB agreed to buy U.K. veterinary drugmaker Dechra Pharmaceuticals Plc for a lowered price of £4.46 billion (about $5.6 billion) in what is still the biggest European take-private this year.
The Swedish buyout firm will pay Dechra investors 3,875 pence (approximately $48.62) a share under terms of the recommended cash offer, according to a statement that confirmed a Bloomberg News report. The parties agreed to reduce the previously discussed price by 4.8 percent after the U.K. company made a profit warning in the middle of takeover talks.
EQT will own 74 percent of Dechra upon completion of the deal, with its co-investor, the private equity arm of the Abu Dhabi Investment Authority, holding the rest.
“Given the uncertain environment, the offer price is fair, representing a good exit for shareholders,” Tradition analyst Gregory Lafitte said. “The deal is straightforward, while several required regulatory and antitrust conditions might take some time to get clearance.”
Lending Package
The acquisition brings some relief to the U.K. buyout market, which has slowed significantly this year amid a dearth of cheap funding for such transactions. While potential deals for Scottish engineering group John Wood Group Plc and U.K. online retailer THG Plc have collapsed in recent weeks, there are signs that others, including a take-private of credit card processing group Network International Plc, may go ahead.
Blackstone Inc. and Goldman Sachs Asset Management are leading a £1.25 billion direct lending deal to support the take-private of Dechra, Bloomberg News reported. Blackstone and Goldman Sachs are committing £400 million (about $430.5 million) each to the transaction.
Dechra said in mid-April it was in talks with EQT about a possible, all-cash bid valuing the company at about £4.6 billion (approximately $5 billion). The two sides had been discussing a possible price reduction since Dechra warned on May 22 that underlying operating profit would be below a previous forecast due to a “more volatile and challenging” environment, people with knowledge of the matter said. Dechra on May 11 extended the deadline to June 2 for EQT to announce a firm offer, in line with U.K. takeover rules.
Pet Deals
Dechra is a global veterinary supplies company that is best known for making drugs for pets such as dogs, cats and rabbits. It also makes products for horses, cattle and pigs. EQT is an acquisitive firm that’s been active in the veterinary market. It’s the largest shareholder in IVC Evidensia, one of the biggest veterinary service providers in Europe, and has also has invested in online retailer ZooPlus and pet insurer ManyPets.
Other providers of veterinary services could stand to gain from the Dechra deal, according to Liberum analyst Edward Thomason. “CVS and, to a lesser extent, smaller U.K. peers Animalcare and Eco Animal Health, should also benefit as investors seek other ways to replicate exposure to the animal health market,” Thomason wrote in a note.
Dechra’s new owners said they plan to support its current management, which unanimously recommends the offer, in accelerating the company’s long-term growth potential including through investments in the pipeline, global expansion and acquisitions.
“With medical innovation accelerating and pet ownership increasing, the animal health sector is expected to benefit from long-term growth and we believe Dechra is well positioned to participate in this significant opportunity,” Anthony Santospirito, a partner at EQT, said in a statement.
Bank of America Corp. and Morgan Stanley advised EQT on the deal, while Investec Bank Plc worked with Dechra.
