Aggreko agrees £2.3bn sale after years of shares decline
THE new private equity owners of Aggreko have signalled their commitment to Dumbarton after unveiling their £2.3 billion takeover of the power rental specialist, as another major Scottish company exits the quoted stock scene.
The deal looks set to mark the end of a volatile few years on the stock market for Aggreko, which saw its shares peak at more than £24 in 2012 but was trading at around £6 in the days before the approach was announced in February.
Aggreko will become the latest in a series of major listed Scottish companies to lose their independence through takeover, following in the footsteps of Scottishpower, Scottish & Newcastle, Kwikfit, Stakis and General Accident. Aggreko looks likely to be delisted after its board recommended shareholders accept an offer from private equity players TDR Capital and I Squared Capital. The bid values the business at 880p per share.
The offer is a 39 per cent premium to Aggreko’s closing price of 635p on February 4 – the last business day before the approach was announced.
However, it is a long way from the highs of September 2012, which came before the price of oil began to plunge in the latter part of 2014. Aggreko’s dominant rental solutions division supplies temporary power generators to customers in the US shale industry. The company’s share price recovered to £12.86 in July 2016, but dropped as low as 314.3p as the coronavirus pandemic took hold last March. It then staged a partial recovery, closing the year at 626p.
Shares closed up 8.5p, or 0.96%, at 897.5p, last night.
Aggreko, which floated in 1997 following its demerger from Christian Salvesen, employs 300 people at Lomondgate Park in Dumbarton, where the company is planning to invest £4.5 million to upgrade its facilities.
It is understood bosses sought assurances that the new owners would continue to commit to Scotland during the takeover negotiations, as well as to its staff in other locations around the world.
And yesterday the new owners pledged that they have “no intention of making any material changes to the conditions of employment or to the balance of skills and functions of the Aggreko Group’s employees or management”.
The company, led by former Centrica chief Chris Weston, currently has around 6,000 permanent employees in more than 190 sales and service centres around the world.
Talks began with Uk-based TDR Capital, and I Squared Capital, which operates in the US and UK, after the initial approach was made in early February.
In the takeover announcement published yesterday, it was noted that the two private equity players have a “proven track record and deep expertise in power and energy transition infrastructure and equipment rental businesses”, suggesting their familiarity with the sectors Aggreko operates in.
TDR’S portfolio includes Modulaire, which rents out modular space, storage units and infrastructure such as air conditioning around the world. It recently joined forces with forecourt and convenience store operators the Issa brothers to acquire Asda.
I Squared Capital has a range of investments in infrastructure companies, including Conrad Energy, a modular power provider which supplies National Grid. Conrad acquired Viridis
Power in October in a deal which significantly increased its energy capacity.
Long-standing Aggreko chairman Ken Hanna described the offer from TDR and I Squared as an “attractive price in cash that fairly recognises Aggreko’s future prospects”. He signalled the new owners are “fully supportive” of Aggreko’s strategy to become net-zero in terms of carbon emissions by 2050. Setting out the strategy in November, Aggreko said its energy transition plans will require capital investment of between £250m and £350m per year. It is understood the view in Aggreko is that the coronavirus crisis will accelerate demand from customers for more sustainable power solutions. Demand for battery and solarhybrid equipment is expected to rise.
In yesterday’s takeover announcement, outlining reasons why bosses recommended the offer, the directors of Aggreko note there are “benefits” in undertaking the energy transition as a private company.
Economist Graeme Roy, dean of external engagement at the University of Glasgow, said: “There has, over the years, been a gradual loss of large-scale Scottish based listed companies. I don’t see why the listing status matters per se… but the key thing will be where decisions are taken. Will the strategic headquarter functions remain here? That’s ultimately the most important thing.”
Professor Roy added: “I guess the key thing to get a handle on will be what the long-term plans are for the company and the Scottish employment base. As with any such opportunity there are clearly opportunities but risks too. [It] will be important to get clarity on that soon.”