Power supplier Aggreko accepts £2.3bn private equity bid

Aggreko looks set to become the latest British business to fall into the hands of private equity after the board of the mobile power specialist recommended a £2.3bn bid.

Management, led by chairman Ken Hanna, said the offer of 880p a share from a consortium of I Squared of the US and TDR Capital of the UK was “an attractive price in cash that fairly recognises Aggreko’s future prospects”.

If the deal is agreed by shareholders, the company will join the growing list of UK-listed businesses taken private.

More than 10 companies are in talks with private equity as the end of Brexit uncertainty and optimism over the vaccine rollout galvanises interest in London, the worst-performing equity region last year. 

“It does seem a bit like a siege of London,” said one fund manager. Private equity, he added, “is on a completely different playing field, they can gear up massively with cheap capital”.

TDR Capital only recently agreed a joint £6.8bn deal with Britain’s Issa brothers to buy the Asda supermarket chain. I Squared Capital focuses on infrastructure.

Their offer of 880p represents a premium of 39 per cent to the closing price on February 4, the day before the offer was made public to the market. The deadline to agree terms of a deal was 5pm on Friday.

Shares in Aggreko were trading at 898.50p at lunchtime on Friday on hopes a rival bidder might emerge. 

Analysts at Peel Hunt said the offer for Aggreko was in line with expectations.

Andrew Brooke at RBC Capital Markets, however, noted that “the shares are worth more”.

A takeout valuation of about 5.5 times 2022 operating earnings “is relatively low compared to other strategic deals whilst recovery and medium-term growth prospects look sound”, he said.

Aggreko was spun off by Christian Salvesen, the shipping and logistics group, and listed on the London Stock Exchange in 1997. The Glasgow-based company provides generators and cooling equipment for large-scale events such as the Ryder Cup and festivals, as well as for remote areas and industrial sites.

Demand for its products, however, was severely hit by the coronavirus pandemic. Results this week showed that pre-tax profits before exceptional items almost halved in 2020 to £102m, although the company said it was “encouraged” by signs of recovery in its markets. 

Analysts said the new owners would be able to help Aggreko manage the energy transition towards net-zero emissions faster. 

Adil Rahmathulla, of I Squared Capital, said: “Repositioning Aggreko fast enough to truly capitalise on these trends and rapidly shifting customer demand requires significant investment in clean technology and a step change in the pace of transformation.”