DCC boss notes short-term public market pressures as bid deadline looms

Is DCC chief executive Donal Murphy warming to the idea of the group being taken private, with two investment firms facing a “put up or shut up” bid deadline of 5pm on Wednesday?

Murphy highlighted the short-term and sometimes fickle focus of public markets at a conference on Monday.

He noted that one of the constant challenges public companies face is chasing quarter-on-quarter growth. It’s something the Trump administration is concerned about too, with the US Securities and Exchange Commission (SEC) proposing last month to allow companies to do away with publishing quarterly reports, saying “excessive focus on quarterly results can distract management from executing long‑term strategy”.

Murphy also noted how quickly big investors can change their priorities. While the group was being drilled in every meeting with fund managers a few years ago about ESG (environmental, social and governance), “no one’s asking” those questions now, he said. “It’s amazing how quickly that went from one extreme to the other extreme,” he said.

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DCC’s own investment pitch is known to have evolved during the period. Having once really pushed the green-transition narrative of how its energy businesses – which runs the gamut of operating 1,173 petrol stations in Europe to distributing liquid gas on both sides of the Atlantic, and installing and maintaining solar PV and heat pump systems – fits into the green transition, it is now emphasising the role it plays in security and affordability of supply. The war in Ukraine and, more recently, the Middle East conflict have brought these issues to the fore.

Unfortunately for DCC, stock market investors did not give it the proper credit for either its green-transition or energy security investment cases before US investment groups Energy Capital Partners (ECP) and KKR put in a £58 per share bid – equating to £4.95 billion (€5.74 billion) in total – in late April. The stock had underperformed the FTSE 100 by 60 per cent in the decade leading up to the proposal.

While the offer was rejected by DCC as “fundamentally” undervaluing the company, it has been reported in recent weeks that the consortium is working on sweetening its offer ahead of the deadline imposed by The Takeover Panel. The stock closed on Monday at £59.75, having traded as high as £63.45 last month. It suggests that investors expect ECP and KKR to come back with an improved offer – though the clock is ticking.