Private equity has swooped on another British company in a deal that values the founder’s stake at more than £120million.
Buyout giant Permira has agreed to buy pharmaceuticals services group Ergomed for £703.1million – putting it on course to become the latest firm to leave the London stock market.
The 1350p-a-share offer sent the AIM-listed stock soaring 28.1 per cent, or 296p, to 1348p.
The price tag values the near-18 per cent stake held by Ergomed founder and executive chairman Miroslav Reljanovic at £123million.
Windfall: Ergomed founder Miroslav Reljanovic’s stake in the biotech firm is currently valued at £123m
But while a deal would result in a windfall for the neurologist, it would be seen as yet another blow to the stock market amid a raft of takeovers.
Companies including Morrisons, Ultra Electronics and G4S are among a host of London-listed firms to have been bought in recent years.
Interest in UK firms picked up during Covid as bidders looked to take advantage of depressed price tags and the weak pound in a wave of ‘pandemic plundering’.
This pattern has lingered into the post-pandemic world as a slew of ‘opportunistic’ investors flock towards London’s knock-down prices – fuelling concerns British companies are being snapped up on the cheap.
Ergomed is just the latest UK based healthcare firm to be targeted this year, following veterinary drugmaker Dechra’s £4.5billion deal with EQT in June and Archimed’s takeover of life sciences software firm Instem for £230million last week.
Max Herrmann, an analyst at Stifel Healthcare, said: ‘This is another example of the UK market proving a rich environment for private equity to make acquisitions highlighting it remains significantly undervalued.’
Reljanovic, a Croatian clinical investigator, set up Ergomed in Zagreb in 1997 and oversaw its float on AIM nearly ten years ago at 160p per share – valuing it at £46million.
The company, which now has 1,400 staff in 100 countries, manages clinical trials for large pharmaceutical companies. London-based Permira focuses on investments in technology, consumer, healthcare and services.
Reljanovic, 64, said: ‘Private ownership by funds advised by Permira, a highly-experienced healthcare investor with a track record of building successful UK-based, global businesses, will allow us to build on the foundations we have created. It also brings with it opportunities to access their operational expertise, global network and capital.’
Danni Hewson, analyst at AJ Bell, said: ‘Pharma is niche, it’s specialist and it’s expensive. Private equity companies like Permira already have skin in the game and a wealth of knowledge and compatible infrastructure that makes investment a straightforward and lucrative decision.
‘For London markets the current game of private equity bargain hunting is leaving some big holes in a sector that is seen as one of the big hopes for the future of UK plc.’
But Sean Conroy, analyst at Shore Capital, said it was an ‘attractive opportunity to lock in returns’ for Ergomed.
Despite the global slowdown in deals, healthcare has been a bright spot, accounting for 16 per cent of total global mergers and acquisitions in the first seven months of this year, according to data from London Stock Exchange.
The 1350p a share offer was more than 28 per cent higher than the stock’s closing price on Friday.
Shareholders have been offered an alternative to the full cash offer under which they can take 451p a share in cash plus unlisted shares in the company.
Ergomed’s board said the offer was ‘fair and reasonable’ and recommended shareholders back the deal.
John Dawson, the senior independent director on the Ergomed board, said: ‘The offer represents a highly attractive valuation. The acquisition also fairly reflects the exceptional quality of the Ergomed business, its people and its future prospects.’
