After a quiet post-Easter week in the markets, our screens began to light up on Thursday afternoon as rumours about a bid for Dechra Pharmaceuticals spread. Post-close the Board of Dechra confirmed that they were in talks with EQT Fund Management regarding an all-cash takeover.
Dechra produce, distribute and sell drugs for companion animals (dogs, cats and horses) and have enjoyed huge success in doing so. We have been shareholders of Dechra since 2019 and regular followers of our UK Equity Growth Fund will no doubt have heard our arguments for why we believe that Dechra is such a strong business. Ian Page founded the business in the early-1990s and has remained CEO and a substantial shareholder throughout. Ian is a shining example of a British entrepreneur who has built a global business on the back of scientific progress and sales clout.
COVID or no-COVID we are seeing structural growth in the number of dogs and cats kept as pets in the western world and (as owners well know), vet bills are only going one way! Dechra were early movers in this space and look set to benefit for years to come – no wonder EQT want to get their hands on it. We have been arguing for a long time now that Dechra shares are undervalued and more than doubled our position in the Company over the last 18 months, putting our money where our mouth is!
We see this bid as vindication that the market has been undervaluing Dechra and that this is a unique and attractive business for a long-term owner. We hope that the management team of Dechra push back on the current price being offered by EQT and would much rather hang onto the shares ourselves at the price being offered. We will make our feelings known to the Board and see how the bid process progresses.
Dechra is not the only quality-growth name in the UK currently undervalued on short-term concerns that a patient buyer can comfortably see past. Watch out Croda, Auto Trader, Genus… (all holdings within Church House UK Equity Growth Fund).
The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.
Please also note the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.