DCC’s shares rose in early trading on Thursday as the group, which is seeking to become its focus to energy, said it has agreed to buy liquid gas businesses in four central European countries.
The stock edged 1.4 per cent higher. However, it remains down by almost 12 per cent over the past month, which analysts, including Kenneth Rumph of Goodbody Stockbrokers, have attributed to concerns about the group falling out of the FTSE 100 index following a large share buyback late last year.
Dublin-based DCC, with a market valuation of £3.79 billion (€4.38 billion), is now the fourth smallest company on the index of 100 large-caps listed in London. The index is widely followed by institutional investors that track market benchmarks.
The company said in a statement that it is buying US-based UGI Group’s liquid gas businesses in Poland, Hungary, Czechia and Slovakia. The deals are based on an enterprise value of about €48 million on a cash-free, debt-free basis.
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The acquisitions are expected to generate a “mid-teen” percentage return on capital employed in the second year of ownership, subject to deals being cleared by various competition authorities.
[ DCC buys Austrian gas distributor for €55mOpens in new window ]
“These latest acquisitions demonstrate DCC’s ability to expand our business in new attractive markets. Liquid gas represents a compelling growth opportunity for DCC to consolidate fragmented markets at high returns,” said Donal Murphy, chief executive of DCC.
“We are very focused on growing our liquid gas business in both Europe and North America. We are already leaders in liquid gas in six European markets where we provide lower-carbon energy solutions to our loyal customer base.”
DCC has been operating in the liquid gas market for nearly 50 years, starting off with purchase of Flogas in the Republic.
DCC completed a £600 million share buyback – through a so-called tender offer to shareholders – in December after finalising the sale of its healthcare unit months earlier. This reduced the group’s number of shares in issue by about 12 per cent.
It followed a £100 million buyback programme launched in May, soon after announcing the deal to dispose the healthcare business – which spans the distribution of medical devices to developing and manufacturing nutritional supplements – for £945 million in cash.
Some £130 million of the amount was deferred for payment within two years by the buyer, HealthCo Investment, which is owned by funds run or advised by London-based private equity firm Investindustrial Advisors.
Last July, DCC agreed to sell its information technology distribution business in Ireland and Britain to German-based private equity group Aurelius in a deal worth £100 million. The deal excludes the freehold of a distribution centre in Burnley in England, which is to be sold separately and estimated to be worth £50 million.
That leaves the larger unit in DCC’s technology division, the North America-focused pro tech business, which specialises in audiovisual equipment for events companies, still on the block. This business was rebranded as Nexora last month.
