Clayton, Dubilier & Rice has increased its offer for UDG Healthcare after shareholders objected to the price originally agreed between the private equity company and the board of the London-listed healthcare group.
The increase will be seen as a victory for investors, who are taking an increasingly tough stance towards takeover bids as private equity groups look for bargains on the UK stock market.
The US-based private equity company said on Tuesday that it had agreed a new bid of £10.80 with UDG’s board, 6 per cent higher than the £10.23 that had initially been agreed last month.
The increased offer has the backing of the owners of 11 per cent of the shares, UDG said in a statement.
They include Allianz Global Investors, which has an 8.6 per cent stake and had objected to the original offer. In a statement on Monday, AllianzGI said a bid at £10.80 “would better reflect the fair value of UDG’s shares”.
However, the improved price might not satisfy all shareholders. Rory Alexander, fund manager at M&G, said last week that £10.80 a share “would still fall short of our expectations on behalf of our customers”. M&G is a top 10 shareholder in the company.
UDG, which is headquartered in Dublin, provides clinical, commercial, communication and packaging services for the healthcare industry. Its shares rose to £10.72 on Tuesday morning, up slightly from £10.65 in the wake of the revised offer.
CD&R, a New York-based private equity firm founded in 1978, said this month that it had approached the UK supermarket group Wm Morrison about a potential takeover.
However, the grocer has rejected CD&R’s bid. Under UK takeover rules, the buyout group has until July 17 to make a firm offer for the grocer or walk away.
The higher offer for UDG is the latest example of a private equity firm raising its offer for a company, even after its board has agreed to a deal at a lower price, in the wake of a shareholder backlash. Last week, Blackstone increased its offer for St Modwen Properties after shareholders objected to the original price.
This approach comes at a time when buyout groups, many of which have raised their biggest ever funds, are announcing bids for UK-listed companies at the fastest pace in more than two decades.
It has sparked a backlash from some traditional fund managers who have said private equity firms are taking advantage of Brexit and the pandemic to snap up companies cheaply.