Private equity firm takes over British pharmaceutical company in £703.1m deal: Ergomed founder collects £120m donation
Private equity has taken over another UK company in a deal in which the founder’s stake is more than £120m.
Buyout giant Permira has agreed to buy pharmaceutical services group Ergomed for £703.1million – making it on course to become the youngest company to delist from the London Stock Exchange.
The offer for 1350p per share sent the AIM-listed share up 28.1 per cent or 296p to 1348p.
The award puts Ergomed founder and CEO Miroslav Reljanovic’s nearly 18 per cent stake at £123m.
Lucky strike: Ergomed founder Miroslav Reljanovic’s stake in the biotech company is currently estimated at £123m
But while a deal would be a godsend for the neurologist, it would be another blow to the stock market amid a string of acquisitions.
Companies such as Morrisons, Ultra Electronics and G4S are among the many London-listed companies to have been bought out in recent years.
Interest in UK companies surged during the coronavirus crisis as bidders sought to take advantage of low prices and a weak pound in a wave of “pandemic looting”.
This pattern has persisted in the post-pandemic world, as a crowd of “opportunistic” investors flock to London’s dumping prices – raising concerns that UK companies are being bought up at cheap prices.
Ergomed is just the latest UK-based healthcare company to be targeted this year, after veterinary drugmaker Dechra inked a £4.5billion deal with EQT in June and Archimed last week life sciences software company Instem took over for £230m.
Max Herrmann, Analyst at Stifel Healthcare said: “This is another example that the UK market offers a good environment for private equity firms to make acquisitions and underscores that the market remains significantly undervalued.”
Reljanovic, a Croatian clinical researcher, founded Ergomed in Zagreb in 1997 and oversaw its IPO on AIM almost ten years ago at 160p a share – a value of £46million.
The company, which now employs 1,400 people in 100 countries, manages clinical trials for large pharmaceutical companies. Based in London, Permira focuses on investing in technology, consumer, healthcare and services.
Reljanovic, 64, said: “Privately owning funds advised by Permira, a highly experienced healthcare investor with a track record of building successful global companies based in the UK, will allow us to build on the foundations we have have created.” It also provides an opportunity to access their operational expertise, global network and capital.”
Danni Hewson, Analyst at AJ Bell, said, “Pharma is niche, specialized and expensive.” Private equity firms like Permira are already on board and have extensive knowledge and compatible infrastructure that make investing easy and affordable make a lucrative decision.
“For the London markets, the current bargain-hunting in private equity leaves some big gaps in a sector seen as one of UK plc’s great hopes for the future.”
But Sean Conroy, an analyst at Shore Capital, said it’s an “attractive opportunity to lock in returns” for Ergomed.
Despite the global slowdown in transactions, healthcare has been a bright spot, accounting for 16 percent of all global mergers and acquisitions in the first seven months of this year, according to data from the London Stock Exchange.
The offer of 1350 pence per share was more than 28 per cent higher than the share’s closing price on Friday.
Shareholders have been offered an alternative to the full cash offer, where they can take 451p per share in cash plus unlisted shares in the company.
Ergomed’s board said the offer was “fair and reasonable” and recommended that shareholders support the deal.
John Dawson, Senior Independent Director on the Ergomed board, said: “The offer represents an extremely attractive valuation.” “The acquisition also reflects the exceptional quality of the Ergomed business, its people and its future prospects.”