DCC board backs KKR, Energy Capital Partners takeover bid for £5.75bn

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DCC board backs KKR takeover

Highlights

DCC board unanimously supports KKR and Energy Capital Partners’ £5.75bn cash takeover at £65.25 per share, with up to £2.72 additional payment possible.
Major shareholders including Aviva Investors, Fidelity International, and founder Jim Flavin criticize the bid as undervaluing DCC’s long-term prospects and board recommendation.
London Stock Exchange faces growing pressure as bid value for listed companies is now 27 times greater than value of new entrants in 2024.

Board recommendation and deal structure

As reported by the Financial Times, DCC says its board supports the private equity offer and expects a majority of shareholders to vote in favour when the deal goes to a vote in September. The consortium of KKR and Energy Capital Partners is offering £65.25 a share in cash, alongside payment covering a final dividend of £1.47 a share and an additional cash amount of up to £1.25 a share, conditional on DCC selling Nexora.

The recommendation follows weeks of disputes with leading shareholders including Aviva Investors and Fidelity International, which argue that the bid significantly undervalues DCC’s longer-term prospects. DCC chief executive Donal Murphy says the board would not have recommended the proposal without believing that most shareholders are likely to back it.

Founder and major shareholder Jim Flavin sharply criticises the recommendation, saying he is astounded by the board’s decision. He says including a dividend paid last week in the announcement is unjustifiable and calls the offer price totally inadequate.

Market pressure and strategic backdrop

DCC says the offer gives shareholders an attractive premium, cash certainty and a value level above what DCC Energy has been able to achieve consistently in public markets. The board adds that meeting its 2030 ambition would require sustained organic execution and successful M&A deployment amid uncertain macroeconomic conditions, regulation and the energy transition.

The company, which supplies off-grid energy services including liquid gas and also operates service stations and fleet services mainly in Europe and the U.S., set out a strategy in 2022 aimed at doubling operating profit to £830 million by 2030. The board says the shares have not sustainably re-rated despite strategic progress, reinforcing its case for recommending the bid.

A takeover of DCC would add to pressure on the London stock market after a run of acquisitions, moves to U.S. exchanges and a weak pipeline of initial public offerings. The article notes that the value of bids for London Stock Exchange companies is 27 times greater than the value of new entrants this year, while Segro last week says it is minded to recommend an improved £14 billion offer from U.S. rival Prologis after a similar shareholder backlash.

Our earlier coverage looked at how strong UK corporate governance is increasingly being tested by weaker performance across many London-listed companies, creating openings for activist investors and private equity buyers seeking to unlock value. We noted that this dynamic has translated into more takeover interest and shareholder pressure, as outside investors argue they can improve margins, capital allocation and operational efficiency at underperforming firms.

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