EQT ups bet on pet industry with US$5.6 billion Dechra deal

Swedish private equity firm EQT has agreed to buy London-listed veterinary drugmaker Dechra Pharmaceuticals for US$5.62 billion in the biggest takeover deal in Britain so far this year.

EQT will pay £38.75 (S$65.3) per Dechra share in cash, the companies said on Friday (Jun 2), lower than the £40.70 it proposed in April after the British maker of drugs for pets issued a profit warning last month.

Dechra’s stock, a pandemic darling that shot to a record high in 2021 after people bought more pets for company during lockdowns, has lost more than a third of its value since the all-time high.

Its shares were 7.8 per cent higher at £36.4 in morning trade.

Dechra’s board said it planned to support the deal, which is expected to close towards the end of the year or early next.

Analysts at Jefferies, however, raised questions about EQT’s basis for revising the offer price, arguing that Dechra’s troubles are likely just temporary.

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“In our view the price reduction from the initial potential offer is disappointing,” they wrote in a note to clients.

Dechra blamed its profit warning in May on wholesalers taking longer than expected to de-stock but said demand from clinics and customers remained strong.

The move to take Dechra private will be a loss for London’s stock market, whose rules are set to be radically simplified in an effort to attract companies back to the city after it lost out on some major listings such as chipmaker Arm.

Global merger and acquisition (M&A) deals sunk to a decade low by deal value – barring lockdown-hit 2020 – in the first five months of the year, due to higher interest rates, economic uncertainty and volatile stock markets, data from LSEG Deals Intelligence showed on Thursday.

But healthcare was a bright spot, accounting for 15 per cent of global M&A in January-May – one of only two sectors to see growth in deal value.

EQT, which has several investments in the pet industry, including vet services company IVC Evidensia and pet insurer ManyPets, said the animal health market remained attractive because of increasing pet ownership and greater focus on animal welfare. REUTERS