DCC’s board is under growing investor pressure to secure a higher bid than £5.7 billion (€6.67 billion) on the table from a US private equity consortium, even if market sources suggest that group founder Jim Flavin’s call for a 50 per cent increase may be unrealistic.
Flavin, who set up DCC in Dublin in 1976 and remains the company’s largest private shareholder, with a 3.2 per cent stake, told the Financial Times in an interview that the board’s provisional endorsement of a £66.72-a-share proposal from KKR and Energy Capital Partners demonstrates “very poor judgment” and would result in the suitors buying the group “on the cheap”.
He said that he believes that DCC should achieve “a price should be around £100 [per share] or more”. Flavin retired from DCC in 2008.
DCC said on June 10th that its board was “minded to recommend” the proposal from US-based Energy Capital Partners and KKR, which represented a 15 per cent improvement on an initial pitch made in April that was rejected as “fundamentally” undervaluing the company.
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However, its largest shareholder, Fidelity International, came out last week against the latest offer – which equated to £66.72 a share – as failing to reflect its real value.
Aviva Investors, with a 2.2 per cent stake, and 1.1 per cent shoulder Ninety One, formerly known as Investec Asset Management, subsequently told the Financial Times that they were not in favour of selling at the planned price.
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Dublin-based, but London-listed DCC, which is in the process of shedding the remains of its conglomerate roots to focus on the energy sector, said on Wednesday that the Irish Takeover Panel had given KKR and Energy Capital another week, until 5pm on July 15th, to make a formal bid or announce a firm intention to bid.
“A £100 valuation might be a stretch, but the possibility of a ‘sweetened’ bid by a more modest amount is definitely being talked about,” said Ken Rumph, an analyst with Goodbody Stockbrokers.
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Other market sources highlighted that the price Flavin is holding out for is well above the £57.83 average price target for DCC among analysts before it first emerged that KKR and Energy Capital were circling the company.
RBC Capital Markets analyst Andrew Brooke estimates that DCC is worth £75 a share on a sum-of-its-parts basis. However, he had a price target of £65 on the stock before the private equity firms made their latest offer.
Shares in DCC ended the session on Friday up 0.2 per cent at £62.75.
Asked if DCC would push the suitors to improve their proposal, a spokesman said: “The board has a duty to act in the best interests of the company’s shareholders.” A spokeswoman for KKR declined to comment, while representatives for Energy Capital did not respond to a request for comment.
DCC, whose businesses once spanned Robert Roberts tea and coffee to waste management, decided in late 2024 to abandon its conglomerate roots by putting its then healthcare division on the market and signalling a strategic review of its technology unit that would also eventually lead to it being put up for sale.
DCC sold its healthcare unit a year ago. It also offloaded part of its technology business, with the remainder of that division currently on the market.
Flavin praised the transformation of the company – led by chief executive Donal Murphy and chairman Mark Breuer – but said it was the first time in 50 years he had not felt aligned with the board of “his baby”. “If the bid fails, and I hope it does ... the chairman will have to think very carefully ... why did he recommend that bid?” – Additional reporting: The Financial Times
