Private equity finds soft takeover targets in London – yet again
Private equity firms KKR and Energy Capital Partners have agreed to a £5.75bn takeover of DCC Energy, a lower-profile member of the FTSE 100. This is the fifth completed or agreed takeover within the FTSE 100 this year, and it highlights the regularity of private equity d…
Intelligence analysis by Llama
DCC Energy, a FTSE 100 energy firm, has agreed to a £5.75bn takeover by private equity firms KKR and Energy Capital Partners. This is the fifth completed or agreed takeover within the FTSE 100 this year, and it highlights the regularity of private equity deals in London.
Imagine you own a company that sells petrol and gas. A group of investors wants to buy your company for a lot of money. They think your company is a good investment because it has a lot of potential for growth. But some of your shareholders don't think they're paying enough money. This is a big deal because it shows that private equity firms are willing to take a long-term view of a company's prospects, even if it takes several years to achieve.
Analysis
A £5.75bn Vote of Confidence in DCC Energy's Strategy
The takeover of DCC Energy by private equity firms KKR and Energy Capital Partners is a significant development in the UK's energy sector. DCC Energy is a lower-profile member of the FTSE 100, but it has a strong track record of executing its strategy to double operating profits to £830m by 2030. The company has a mix of old and reliable cash earners, such as petrol stations and liquid gas distribution networks, and newer growth assets, such as a clean energy services division that installs solar panels and suchlike.
The takeover price of £5.75bn, or £65.25 a share, is a 24% premium on the pre-action share price. While this may seem like a good deal for DCC Energy shareholders, it is worth noting that the company's founder and some institutional investors, such as Fidelity International and Aviva Investors, had opposed the deal, citing concerns that the private equity firms were not paying enough.
Why Private Equity Firms Are Willing to Take a Longer-Term View
The takeover of DCC Energy highlights the willingness of private equity firms to take a longer-term view of a company's prospects. In this case, KKR and Energy Capital Partners are willing to invest in DCC Energy's strategy to double operating profits to £830m by 2030, even though this may take several years to achieve. This is in contrast to public market investors, who often prioritize short-term gains over long-term growth.
The Implications for the UK Stock Market
The takeover of DCC Energy is a reminder of the regularity of private equity deals in London. According to a report by Peel Hunt, there have been 154 bids for UK companies with a market value of more than £100m since the start of 2023, equating to £165bn of stock market capitalisation. This highlights the importance of private equity firms in the UK's energy sector and the need for policymakers to consider the implications of these deals for the country's global influence.
The Shrinking of the UK Stock Market
The takeover of DCC Energy is also a reminder of the shrinking of the UK stock market. In recent years, the number of arrivals on the London market has dried up, and the UK's global influence has declined as a result. This is a concern for policymakers, who need to consider the implications of these deals for the country's economy and its global influence.
Key points
- DCC Energy has agreed to a £5.75bn takeover by private equity firms KKR and Energy Capital Partners.
- This is the fifth completed or agreed takeover within the FTSE 100 this year.
- The takeover price of £5.75bn is a 24% premium on the pre-action share price.
- Some institutional investors, such as Fidelity International and Aviva Investors, had opposed the deal, citing concerns that the private equity firms were not paying enough.
- The takeover highlights the willingness of private equity firms to take a longer-term view of a company's prospects.
If the takeover of DCC Energy is successful, it could lead to a wave of private equity deals in the UK's energy sector. This could bring in new investment and help to drive growth in the sector. However, it's worth noting that the takeover price of £5.75bn is a 24% premium on the pre-action share price, which may not be a good deal for DCC Energy shareholders.
The takeover of DCC Energy could also lead to a decline in the UK's stock market. If private equity firms continue to dominate the market, it could lead to a lack of competition and a decline in the number of arrivals on the London market. This could have implications for the country's global influence and its economy.
