Two private equity firms just scooped up a big energy distributor.
Negotiations for the acquisition lasted several weeks, with deadlines postponed four times over a period of just over a month. Aviva Plc and Fidelity International, among DCC's top shareholders, voiced dissatisfaction with the offer price.
At 8:09 a.m. Monday in London, DCC's stock had risen about 1.2% to £63.60.
DCC's business is mostly in fossil fuels. That is a problem in public markets right now.
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DCC operates across multiple countries, distributing heating oil, LPG, and natural gas, and had set a target to double operating profit by the end of the decade. However, the company's heavy hydrocarbon exposure hindered its ability to attract growth-oriented investors in public markets.
Murphy acknowledged that delivering the strategy involves risks, both to organic performance and in terms of capital deployment.
The extended negotiation process, with four deadline postponements over five weeks, reflected the difficulty in bridging the gap between shareholder expectations and the consortium's offer. Aviva and Fidelity had publicly criticized the price, arguing it undervalued the company's long-term potential, even as the premium seemed attractive.
This deal is part of a bigger pattern. According to data compiled by Bloomberg, the UK stock market is shedding over $2 billion per week through these acquisitions, fueling worries about London's status as a global financial center. DCC's departure from the FTSE 100 will reduce the number of Irish companies on the index, mirroring earlier shifts by CRH Plc and Flutter Entertainment Plc to American stock exchanges.
Murphy stated in an interview, "the board would not now back the KKR and ECP bid unless they were sure shareholders would approve it." He added, "If you look at the institutional shareholders that have been vocal and have talked about a price, the difference is very modest between where the consortium's offer is and their view on value."
DCC's decision to accept the bid follows a strategic review during which the company weighed its options in a climate where traditional energy firms often trade at a discount. The private equity consortium, which includes KKR's infrastructure platform and Energy Capital Partners, specializes in energy and utility assets, making DCC a natural fit for their portfolio.
The acquisition highlights how private equity can move quickly on assets that public investors undervalue due to ESG concerns. For DCC, exiting public markets may allow management to execute its energy transition plan without the constant pressure of quarterly earnings expectations. The firm's heavy hydrocarbon exposure, which depressed its stock price, becomes less of a liability when taken private by investors focused on long-term cash flows.
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