Shares in healthcare services group UDG Healthcare (UDG) surged 22% to £10.23 on Wednesday after the board recommended a cash offer for the company pitched at £10.23.

The offer from US private equity firm Clayton, Dubilier & Rice LLC represents a 30.3% premium to the volume weighted average price of 785.3p over the last six months to 11 May.

The transaction values UDG at an implied enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortisation) ratio of 17.2 times. The implied enterprise value of £2.78 billion represents the combined value of outstanding equity and debt.

RATIONALE

UDG’s Ashfield division, which provides advisory, communications and commercialisation services, is said to be ‘highly complementary’ with CD&R’s Huntsworth business which it purchased in 2020.

The company said the combination of the two businesses would create a ‘unique set of global solutions’ to support Pharma and Biotech clients across the life cycle of a drug, from development to patent expiry.

The private equity firm said it would invest in UDG’s Sharpe division, to support its growth prospects. Sharpe provides high quality outsourced contract clinical trials, manufacturing and packaging services.

SOME SHAREHOLDER SUPPORT

The company’s second-largest shareholder Kabouter Management LLC, which owns 5.5% of the shares, has indicated its support for the offer, along with the management of UDG which represents 5.6% of the shares.

The acquisition is expected to be declared effective during the third quarter of 2021, subject to shareholder approval.

INTERIMS

In a separate announcement the company said first half adjusted operating profit increased by 10% to $90 million despite flat revenues, reflecting higher adjusted group operating margins of 14.8% compared with 13.6%.

Post period end, the company acquired US-based healthcare consultancy Nuvera, which specialises in patient support, for a potential consideration of $36 million.

Guidance for full year adjusted operating profit growth was increased to between 12% and 14% from 11% to 13% previously.

UDG is a running Shares Great Idea.

READ MORE ABOUT UDG HEATHCARE HERE

 

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Issue Date: 12 May 2021