Dublin-based energy group DCC Energy, a member of the FTSE 100 index, has agreed to a £5.75 billion takeover by private equity firms KKR and Energy Capital Partners, marking the fifth significant buyout within London’s leading stock market index this year. The deal values DCC at £65.25 per share, reflecting a 24% premium on its pre-offer share price.
Despite the premium, some shareholders, including Fidelity International, Aviva Investors, and DCC’s founder, voiced opposition to the bid, arguing that the offer undervalues the company's long-term potential. Fidelity’s Alex Wright stated that he would not accept anything below £70 per share, citing DCC’s strong returns on capital, acquisition opportunities, pricing power in a consolidating market, planned share buy-backs, and the potential for growth in renewable energy activities. He also contended that concerns over the decline of DCC’s fossil fuel distribution business have been overstated.
DCC has been implementing an eight-year strategy initiated in 2022 aiming to double operating profits to £830 million by 2030. This plan focuses on streamlining the company around its core energy operations, which include petrol stations and liquid gas distribution networks across Europe, alongside an expanding clean energy services division. The board reported that approximately 35% of the targeted growth in operating profits has already been achieved and remains confident in meeting the 2030 objective.
Company management justified the decision to accept the private equity offer by highlighting the certainty and immediacy of the cash value for shareholders, amid challenges in attracting new investors. The company noted that its shareholder base has become more concentrated over recent years, with fewer market participants engaging with the business. Feedback suggested that exposure to low-growth segments like petrol stations and gas distribution has depressed DCC’s valuation multiple.
The board negotiated the offer upwards in stages, eventually reaching £65.25 per share, plus additional components including a previously paid dividend and a contingent payout linked to the sale of a remaining technology subsidiary. CEO Donal Murphy expressed confidence that the majority of shareholders will approve the bid.
The takeover of DCC Energy fits a broader pattern of increasing private equity activity in the UK market. Recently, Segro, a warehouse landlord, was acquired by a larger U.S. rival for £14 billion. Since the start of 2023, there have been over 150 bids for UK companies valued above £100 million, representing a combined market capitalization of approximately £165 billion. While not all of these deals involve private equity, London has become a particularly attractive target for buyout firms.
This trend highlights challenges within the UK stock market, including a shrinking investor base and reduced capital flow, which some analysts suggest could weaken the market’s standing and its broader economic influence. Despite these concerns, political response in the UK has remained muted.