Aggreko has become the latest British company to fall into private equity hands after it accepted a £2.3bn takeover bid.
The FTSE250 power equipment provider has accepted an offer from I Squared Capital and TDR Capital worth 880p per share, 39 per cent above the closing price on February 4 when it was first tabled.
Chairman Ken Hanna insisted the offer was ‘an attractive price in cash that fairly recognises Aggreko’s future prospects’.
But critics warned it was just the latest case of buyout firms snapping up British businesses on the cheap in what has been dubbed ‘pandemic plundering’.
Asda, G4S, LV and the AA are among other businesses that have been taken over by private equity firms in the past year.
And so far this year, private equity has snapped up 39 British companies in deals worth more than £10billion, according to data firm Dealogic.
When the bid for Aggreko was made last month, the company’s shares were trading nearly 25 per cent below their value at the start of 2020.
It followed a drop in demand during the pandemic for temporary generators, which the company normally supplies to outdoor events such as the Glastonbury Festival.
On Monday Aggreko reported that its profits in 2020 had been almost cut in half to £103m.
Investment manager Justin Urquhart Stewart, of 7iM, claimed the takeover was a ‘classic example of a private equity firm buying assets at a discount’.
He said: ‘It’s a great shame because Aggreko is a really good business and to lose another listed company to private equity is very sad.
‘Is this actually going to add value, in terms of growing the business and employing more staff? I am sorry to be cynical but I doubt it.
‘It is more likely the main objective it is to buy the company at a discount now and sell it for a higher price later on. This is the perfect feeding time for private equity, because there are lots of businesses which have been damaged by the pandemic but still have very good underlying assets.
‘In Aggreko’s case, yes it has lost a lot of business but clearly people are already talking about the return of events this summer and next year.’
Russ Mould, investment director at AJ Bell, said Aggreko’s takeover was the latest sign that the ‘breadth and depth of the UK market continues to be chipped away’. Professor John Colley, a takeovers expert and associate dean at Warwick Business School, added: ‘We have seen a lot of private equity firms buying up distressed assets in the past year.
‘That can be good, because in some cases these are businesses that otherwise might not be able to raise money and would go bust.
‘But it’s quite likely we will see a lot of these companies returning to the market, because if quantitative easing keeps driving stocks higher then the private equity firms will want to float them and get rid of them for a higher price.’
Gary Lindsay of TDR Capital LLP, said: ‘I Squared Capital and TDR Capital together have a proven track record and deep expertise in investing in the power infrastructure and equipment rental sectors.
‘Aggreko is a business that fits this investment focus well. It has the potential to enable the energy transition through clean technology investment, as the world focuses increasingly on energy efficiency and sustainability.
‘We fully support Aggreko’s vision for long term growth and believe our partnership will enable it to accelerate its strategy.’ The takeover will be need at least 75 per cent approval from shareholders at its forthcoming general meeting and is expected to complete in the summer if it receives the go-ahead.