MARKET REPORT: Dechra shares plunge 13% after veterinary drug maker warns earnings will be even lower than feared
Shares in takeover target Dechra Pharmaceuticals plunged after it warned earnings this year will be even lower than feared.
The FTSE 250 group, which makes medicines and treatments for pets and farm animals, said it will earn less than £186 million in the 12 months to June 30.
It came after an earlier profit warning in February when it said profit for the year would be at the “lower end of market expectations” at £186m.
Shares in the company, which is in talks for a £4.6 billion takeover by Swedish private equity firm EQT, fell 13 percent, or 476 pence, to 3174 pence.
Dechra said things were “more volatile and challenging” than expected between January and April. Demand has been hit as customers in the US and Europe reduce excess inventory before buying more.
Profit warning: Dechra, which makes medicines and treatments for pets and farm animals, said it will earn less than £186 million in the 12 months to June 30
Dechra said that while there were signs of improvement in both the US and UK in recent weeks, trading in the rest of Europe remained difficult.
Dechra insisted it remains “very well positioned” to grow in the medium and long term, even in the face of such difficult market conditions. The group added that talks were underway with EQT about a possible offer of 4070p per share.
Earlier this month, the pair pushed back the date to complete the £4.6 billion offer by three weeks to June 2.
If Dechra makes a final offer and then accepts it, the mid-cap company will join a growing list of UK companies that will be gobbled up by private equity predators.
Despite the gloomy update, Liberum analyst Seb Jantet struck an optimistic tone about the chances of a deal.
He said: ‘While it is never helpful for trading to weaken during an offer period, we don’t think this will change EQT’s appetite to make a bid.
“The main determinants of whether EQT will make a formal offer or not, in our view, remain familiarity with Dechra’s ability to sustain growth and what remain tight debt markets.
“What it probably does is increase the likelihood that investors will accept an offer if one comes on the table.”
The FTSE 100 gained 0.2 percent, or 14.12 points, to 7770.99 and the FTSE 250 lost 0.1 percent, or 15.76 points, to 19273.34.
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