M&G Investments, the £ 367 billion asset manager, has launched plans to sell London-listed UDG Healthcare to buying firm Clayton, Dubilier & Rice, the latest in a series of criticism of major fund managers on private equity shares.
Shareholders will have to vote in June on the three million pound offer to sell UDG, which provides clinical, commercial, communication 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 offer fair value to ordinary shareholders, including customers on whose behalf we invest”.
Allianz Global Investors, UDG’s major shareholder, has also criticized the deal. Earlier this month, Elliott Investment Management, the activist investor, said it had been involved in the Dublin-based company.
Criticisms from M&G and AllianzGI come at a time of growing concern in the UK for listed companies to sell too cheaply to private equity firms.
While fund managers rarely make public statements about companies, some have decided to talk about private equity deals in recent weeks, including Schroders, who criticized transport operator FirstGroup’s planned sale of £ 3.3 billion of its business in the United States to the Swedish group EQT.
Private equity groups, many of which have secured their largest funds in history, are targeting the UK stock market with the aim of capitalizing on lower valuations in the wake of Brexit and the pandemic.
Thirteen private equity acquisitions of listed companies in the UK have been announced since early 2021, the highest figure since 2006, according to Refinitiv data. Only two were announced during the same period in 2019.
Rory Alexander, M&G’s fund manager, said he was concerned that CD&R would benefit from the UDG deal at the expense of ordinary investors.
“The $ 3.7 billion offer does not reflect the long-term value creation potential of UDG’s organic growth history, strategic procurement opportunity, steady cash generation and strength balance sheet,” he said.
“The material mismatch between the bid price and our view on the true value of UDG represents an investment transferred to ordinary 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 “it ensures the delivery of future value to cash shareholders today. The offering reflects the quality, strength and long-term performance of UDG companies and their potential for future growth.”
CD&R declined to comment.
AllianzGI, which owns 8.6% of UDG’s shares, said earlier this month that the price “did not adequately offset existing shareholders,” adding that the board’s duty was to “obtain a fair value for to shareholders “.
“AllianzGI strongly believes that the offer is opportunistic and significantly underestimates UDG and its prospects and is not in the best interest of shareholders. Consequently, based on the information available, AllianzGI intends not to accept the current offer. despite the UDG Board recommending it to shareholders, ”he added.