Dechra warns of profit warning after £4.6bn Takeover Talks

Dechra Pharmaceuticals warned that its earnings would be lower than expected, as it negotiates with a Swedish firm for a £4.6billion takeover.

The company informed investors that its profits would be affected by American wholesalers’ holding less inventory. It also said it had observed a similar pattern in the UK.

The FTSE group stated that there were “encouraging” signs of a sales recovery in the United States, but the European market appeared to be “slowing down” due to an uncertain economic outlook. Dechra’s board expects to report a underlying operating loss of £186million, which is less than its previous guidance.

Dechra shares fell by 7.3 percent, or 268p to £33.84, this morning, following the unexpected announcement. EQT is offering £40.70 for each share.

Dechra announced last month EQT made a bid to buy the group, in a deal backed up by Abu Dhabi Investment Authority. Private equity investors made a number bids on London-listed companies including John Wood Group and THG.

EQT has assets worth EUR210billion and invested in Evidensia – the largest veterinary provider in Europe.

Dechra is a veterinary product manufacturer and distributor based in Cheshire. It has eight production sites. Under the leadership of Ian Page, 61 years old, the company has grown through bolt-on acquisitions. It now employs around 2,300 people.

Dechra stated that it was “remaining in discussion” with EQT about the deal.

The company stated: “The Board is confident that the Group remains very well-positioned to continue growing over the medium and long term despite the unprecedented, and by nature, temporary trading headwinds.

The fundamentals and strategy of the company remain strong. Our underlying markets are still growing structurally. We continue to grow our selected markets. And we have a highly-experienced and focused management team.”

Max Herrmann, a Stifel healthcare analyst, stated: “Clearly, this is a disappointing news, and it increases the risk that EQT will lower its offer or walk away from a deal. EQT was interested in Dechra because of its long-term potential. This has not changed. We still think that the discussions will result in a firm EQT offer for Dechra.”

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