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DCC’s board has shown “very poor judgment” in recommending a private equity takeover “on the cheap”, the founder of the FTSE 100 energy company has said, as he appealed to shareholders to join him in rejecting the £5.7bn bid.
Jim Flavin, who set up DCC in Dublin in 1976 and remains the company’s largest private shareholder, said he wanted “to stop this bid if I can”.
His intervention comes as KKR and Energy Capital Partners, part of London-listed Bridgepoint, must formalise their offer or walk away by next week after a deadline was extended on Wednesday.
“I believe the board and management exercised very poor judgment in stating publicly that they were minded to recommend a bid at £65.25,” Flavin, who retired from DCC in 2008 and holds a 3.22 per cent stake, told the FT. He believes “a price should be around £100 [per share] or more”.
His criticism of the £65.25-per-share offer in cash plus £1.47 in dividends comes after major investors Fidelity International, Aviva Investors and Ninety One blasted the bid as too low and significantly undervaluing the company’s growth prospects.
The revised offer — increased from £58 per share — represents a premium of 24.5 per cent on DCC’s share price before the bidding consortium’s initial proposal on April 28, rebuffed by the company. Before that, analysts’ average target price for London-listed DCC was £57.83.
DCC said: “The board has a duty to act in the best interests of the company’s shareholders.”
For Flavin, Wednesday’s negotiation extension was the “last straw”. He has written to other interested parties, whom he declined to name, saying the “board have effectively put DCC Energy Plc on the market on the cheap”.
DCC, which is based in Dublin and whose main markets are in Europe and the US, is a former conglomerate that has refocused on energy to provide off-grid solutions such as liquefied gas while operating service stations and fleet services.
It was a “juicy morsel” for private equity given that it has long achieved a 20 per cent return on capital and a cash conversion ratio of near 100 per cent, said Flavin, who has not been involved in the day-to-day running of the company for nearly 20 years.
Once its technology business is sold — a £600mn deal expected by year-end to complete its refocus — DCC will be virtually debt-free, he added.
Flavin praised the transformation of the company — led by chief executive Donal Murphy and chair 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?”
Breuer did not immediately respond to a request for comment.
The board “should be encouraging shareholders to stick with us . . . and don’t consider [a bid] at all unless the price is £100”, Flavin added. “That price is a justifiable price commercially and financially and logically.”
Still, while he said there was “nothing outlandish” about that price, he conceded there was “absolutely no chance” of any bid being increased to £100.
A successful bid for DCC would mark the latest big departure from the London Stock Exchange in another blow to Britain’s capital markets, following a series of takeovers by private equity and overseas buyers, as well as defections by UK companies to US exchanges.
“It is a shame that London is disappearing, nearly, as an important financial market because FTSE 100 companies are being taken over by large US private equity groups,” Flavin said. “The London market needs support.”
Flavin resigned as executive chair in 2008 amid Ireland’s first insider trading case over the sale of a DCC stake in fruit importer Fyffes, but Ireland’s Supreme Court in 2009 found he had not been aware he was in possession of price-sensitive information.
Flavin said he believed DCC had long been undervalued by the market because of its conglomerate status and a £100-per-share price tag would represent 16.6 times earnings, compared with what he calculated as 10.8 under the current proposal.
He added that DCC should aspire to emulate the success of Irish building materials giant CRH — which moved its primary listing from London to New York in 2023 before abandoning London altogether in April — in becoming a world leader in its field.
If, however, in the face of shareholder opposition, the board U-turns and rejects the overture, “I’d be the first through the door of DCC with bottles of champagne . . . [saying] ‘Thank God you saw the light. Congratulations.’”
