Take-private snubs hit UK buyout totals

The recent glut of rejections of public-to-private bids by private equity firms in the UK has contributed to a sedentary buyout market in the first quarter of 2006.

The latest research reveals that the UK buyout market has got off to a slow start with only £3.1 billion (€4.4 billion; $5.4 billion) of deals recorded for the year to date.
The previous year’s statistics from the Centre for Management Buyout Research (CMBOR), in association with Barclays Private Equity and Deloitte, showed the UK buyout market reaching an all-time high in 2005 with total deals worth £24.5 billion.

This is a case of one too many ants at the picnic – private equity has become a victim of its own success.

Tom Lamb, co-head, Barclays Private Equity

Public-to-privates accounted for a large share of that 2005 figure, with 20 transactions totalling £7.2 billion, the second highest annual total ever, according to CMBOR.
The value of take-privates in the first three months of 2006, however, stands at just £485 million from four deals. This total is dominated by the £404 million PTP of the Peacock Group, which was acquired in January by a private equity/hedge fund consortium including Goldman Sachs Capital Partners, Och-Ziff and Perry Capital.
“There seems to have been an increasing number of approaches made over recent weeks, but nothing is being consummated – all foreplay and no finish,” said Tom Lamb, co-head of Barclays Private Equity, in a statement. “With the huge funds that have been raised, there is a lot of money in the market looking for a home and public company shareholders have clearly decided they should be demanding a much larger premium. This is a case of one too many ants at the picnic – private equity has become a victim of its own success.”
A number of private equity bids for public companies have been rejected by shareholders in recent weeks. Media giant VNU is currently facing opposition from minority shareholders over a private equity consortium’s €7.5 billion bid for the business.
Danish pension fund ATP is taking legal action and has filed a complaint with the Danish Commerce and Companies Agency over private equity consortium Nordic Telephone Company’s attempt to squeeze out minority shareholders in its €10 billion offer to take Danish telecom TDC private.
More recently, ITV, HMV, Kesa Electricals and GUS have all snubbed private equity buyout bids as undervaluing the respective businesses.
Mark Pacitti, corporate finance partner at Deloitte, added that public company shareholders appear to have wised up to private equity practices. “As the private equity model becomes better understood in the market, public company shareholders are asking themselves, ‘if the business can be improved with gearing and a clear strategy for growth in order to sell it on, why not do it ourselves instead of private equity firms?’” he told PEO.