Vet pharma firm Dechra backs £4.5bn private equity deal

Vets products supplier Dechra Pharmaceuticals was today the target of a £4.5 billion takeover bid from a Swedish private equity firm, raising hopes of a revival in London’s becalmed M&A sector after a protracted lull.

The agreed offer, which is being led by Swedish EQT and also involves the Abu Dhabi Investment Authority, is the biggest “taking private” deal seen in London so far this year.

It values the FTSE 250-listed company at £38.75 a share, representing a 44% premium to Dechra’s closing price prior to the bid interest emerging in April. If it is approved by shareholders, the firm hopes to complete the deal by the beginning of 2024.

Anthony Santospirito, Partner in the EQT Private Equity advisory team, said: "Dechra is a high-quality, innovative business founded in the UK with an impressive global footprint.

“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.”

Under the leadership of chief executive Ian Page, Dechra has grown into a global veterinary pharmaceuticals and related products business. It is ranked seventh globally by revenues, with operations in 26 countries and 2470 employees.

The Cheshire-based company listed on the London Stock Exchange in 2000 with a market value of £60 million. Page, who began his career as a vet medicines van driver before launching Dechra in 1997, stands to pocket £15 million from the deal via his 0.4% stake in the business.

However, the takeover represents a discount to the earlier £40.70 a share offer EQT made in April. It comes after Dechra put out a second profit warning in three months in May, after it warned that “widely reported destocking” in the US was lasting longer than previously expected.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The pet boom should broadly play into a positive story for Dechra, but the deal will end shareholders’ long-term bets on the company. It will also remove doubt stemming from the sensitive share price.”

The deal offers a rare glimmer of hope for the UK’s M&A credentials after a slump in takeovers to the lowest levels seen since 2016. The total value of mergers and acquisitions, involving UK companies, halved to just under $90bn in the first five months of the year, after a number of major offers were withdrawn or rejected by the competition regulator.

“The region is seen by some as a less accommodating place in which to do big business, and this could have implications across UK valuations,” Lund-Yates said.

“Companies that may, in theory, be prime takeover targets could have some of that premium taken away or muted, as investors think twice about the likelihood of bidders coming to the table in the current climate.”