M&G Investments, the £ 367 billion asset manager, has slammed plans to sell London-listed UDG Healthcare to buyout firm Clayton, Dubilier & Rice, the latest in a series of criticisms of the operations of private equity by large fund managers.
Shareholders are due to vote in June on the £ 2.8 billion offer to sell from UDG, which provides clinical, commercial, communications and packaging services for the healthcare industry.
But London-based M&G, which is one of UDG’s top five shareholders according to data provider CapitalIQ, said the offer “does not provide fair value to common shareholders, including customers for the account in which we invest ”.
Allianz Global Investors, UDG’s largest shareholder, also criticized the deal. Earlier this month, Elliott Investment Management, the activist investor, said he had taken a stake in the Dublin-based company.
The criticisms of M&G and AllianzGI come at a time when the UK is increasingly concerned that listed companies are being sold too cheaply to private equity firms.
While fund managers rarely make public statements about the companies, some have decided to denounce deals involving private equity in recent weeks, including Schroders, who has criticized the planned £ 3.3bn sale by the transport operator FirstGroup from its US operations to the Swedish buyout group EQT.
Private equity groups, many of which have raised the biggest funds ever, are targeting the UK stock market in an attempt to capitalize on lower valuations in the wake of Brexit and the pandemic.
Thirteen private equity buyouts of UK listed companies have been announced since the start of 2021, the highest figure since the start of 2006, according to figures from Refinitiv. Only two were announced during the same period in 2019.
Rory Alexander, a fund manager at M&G, expressed concern that CD&R would benefit from the UDG transaction at the expense of ordinary investors.
“The $ 3.7 billion offer does not reflect the long-term potential value creation of UDG’s organic growth, the opportunity for strategic acquisitions, consistent cash generation and a fortress balance sheet,” did he declare.
“The significant mismatch between the bid price and our opinion on UDG’s true value represents a benefit transferred from the common shareholders to the private equity bidder.”
UDG declined to comment. But when the deal was announced on May 12, UDG President Shane Cooke said it was an “attractive offer.” He added that this “ensures the delivery of future value to shareholders in cash today. The offering reflects the quality, strength and long-term performance of UDG’s business and its potential for future growth ”.
CD&R declined to comment.
AllianzGI, which owns 8.6 percent of the shares in UDG, said earlier this month that the price “does not adequately compensate existing shareholders”, adding that it was the board’s duty “to secure a fair value to shareholders ”.
“AllianzGI strongly believes that the offer is opportunistic and significantly undervalues UDG and its prospects and is not in the best interests of shareholders. Therefore, based on the information available, AllianzGI is aware that it does not accept the current offer although it has been recommended to shareholders by the board of directors of UDG ”, he added.