He hasn’t gone away, you know. While DCC Energy investors Aviva, Nine One and Marathon Asset railed against the group’s planned £5.73 billion (€6.69 billion) sale months ago before selling down their stakes at prices below the offer value, founder Jim Flavin is keeping up the fight ahead of Friday’s crucial shareholder vote.
“I am seeking to make shareholders of DCC Energy realise that there is a much better way for them to maximise the value of their shareholding by not accepting the current miserable bid of £65.25 per share – with limited upside potential to £66.50 – from KKR and Energy Capital Partners,” Flavin said in a statement.
The transaction comprises a £65.25 per share upfront payment and £1.25 extra per share if the company achieves at least $800 million (€693 million) from a sale of the tech division.
Flavin, who founded DCC in 1976 and retains a 3.2 per cent stake, has consistently argued since piping up in July that the group should remain an independent, publicly quoted company and continue its journey from being a diversified conglomerate into a pure energy player.
Group chief executive Donal Murphy argued, as the board agreed later that month to sell to KKR and Energy Capital, that while he “absolutely believes” the remaining energy division is on course to double its operating profit to £830 million between 2022 and 2030, the target is “not without risk” when weighed against an uncertain geopolitical and macroeconomic backdrop as well as the need for the group to invest £1 billion-£1.2 billion.
“When the board looks at it and evaluates [the bid] in totality, we believe that this is very compelling from a shareholder perspective,” Murphy told The Irish Times at the time.
Flavin is having none of it, arguing that shareholders would be much better served by DCC completing its “well-advanced transformation”.
Shares in the company are trading at about £63.30. That’s up 18 per cent from where the stock was trading in late April, before the suitors emerged, and almost 5 per cent off the maximum value of the offer. It suggests a high likelihood of the deal being backed by shareholders at the extraordinary general meeting, based on probability models used by merger-arbitrage funds, according to market sources.
With final proxy votes due by 2pm on Wednesday, Flavin remains hopeful his is not a lost cause. “All is not lost,” he said. “A ‘no’ vote would free the board of DCC Energy to follow its logical growth strategy.”