🦅 Private Equity Circles UK Markets

London-listed stocks are back in focus for PE funds, Marex becomes the latest company to potentially overlook the London Stock Exchange and China posted enormous export growth for March.

April 14, 2023

Good morning. In today’s update - Markets brushed off Thursday’s weak GDP figures, London-listed stocks are back in focus for PE funds, Marex becomes the latest company to potentially overlook the London Stock Exchange and China posted enormous export growth for March.

Markets

London stocks brushed off a weak UK GDP reading to continue higher on Thursday, bolstered in part by a surprise drop in producer price inflation in the US. Housebuilders led the charge yet again after analysts at HSBC upgraded a number of names in the sector, claiming the downturn in house prices was already “priced-in” to shares. More widely, the FTSE 100 gained +0.2%, with the FTSE 250 slightly further ahead at +0.4%.

Top Stories

🦅 Private equity eyes UK plc

Dechra Pharmaceuticals confirmed on Thursday it was in talks with Swedish megafund EQT (with help from Abu Dhabi’s ADIA), regarding a potential £4.6bn acquisition. The Dechra board is ready to give its stamp of approval, saying it was likely to recommend shareholders accept (should EQT make a firm bid). The offer represents a 46% premium to the latest share price. (Official)

Elsewhere, London-listed payments provider Network International also announced they’d been approached by private equity regarding an acquisition, this time from CVC and Francisco Partners. Both parties stayed quiet on a value for any potential offer, however this didn’t stop Network’s shares from surging 23%. Under the UK takeover rules, CVC/Francisco Partners now have 28 days to make a firm offer. (Official)

⏸ UK growth flatlined in February

The latest figures from the ONS showed UK GDP missed forecasts in February to show zero growth, with economists having expected a slight 0.1% increase. Strong growth in construction (repair and maintenance) was offset by weaker services as a result of industrial strike action (particularly in education and public administration). On a more positive note, thanks to a revision to January data (from 0.3% growth to 0.4%), the UK economy is now back above pre-pandemic levels. (See full ONS report here)

👋  Marex ponders $1.6bn New York listing

Having cancelled its IPO in London in 2021, commodity broker Marex’s PE owners are back reviewing exit plans. However, it’s become the latest company to question London’s allure, by this time considering a listing in the US. The FT reported a big jump in the expected valuation of Marex to between $1.6bn-$1.7bn (up from the $650m-$800m they were looking for in 2021), after posting record profits in 2022.

What Else Happened?

Economics / Politics / General

UK lenders saw default rates rise sharply as higher borrowing costs hit companies and individuals; results from the BoE survey were the second worst since the GFC.

Higher demand and lower supply - UK rental market in a “frenzy” as a lack of available properties caused prices to surge.

Deals

Teck rejected Glencore’s latest proposal, but left the door open to a transaction under a different structure, asking the UK-listed miner to spin out its thermal coal business before approaching them again. (Official)

Today’s VC roundup - London-based SaaS firm Cerbos secured £6m of seed funding from Canadian pension fund OMERS; Cheesecake Energy, a green energy storage startup, secured £9.4m from the government to fund the installation of a test unit in Colchester; Greentech startup Myenergi raised a £30m debt facility from HSBC to expand development of its smart home energy products.

Company News / Trading Updates

Tesco warned markets on Thursday that it would struggle to grow profits for 2023 as inflation continues into the second half of the year. However, shares rose as the UK’s biggest supermarket also announced an additional £750m share buyback scheme. (Official)

Listed cybersecurity business Darktrace saw shares edge up 2.5% after investors praised its higher EBITDA margin forecasts for 2023; the move came despite a slowdown in new customers. (Official)

Carex owner PZ Cussons benefited from a mix of increased demand for fake tan brand St. Tropez, along with wider price hikes in Q1 - the Manchester-based company expect full year profits to be “at least in line” with market expectations. Shares rose 3.7%. (Official)

🌎 Global Snapshot

China’s export growth more than doubled expectations in March, rising 14.8% compared to a year ago; however, economists warn this was likely suppliers catching up from a lockdown-related backlog, rather than a surge in global demand.

The US producer price index (a measure of inflation from the manufacturers perspective) fell well below estimates in March - the most since the start of the pandemic - as lower energy costs eased inflation.

Chinese ride-hailing app Didi Global is looking to develop self-driving taxis, with plans to roll them out by 2025.

Leeds United owner Andrea Radrizzani is reportedly eyeing a bid for Inter Milan - first, he needs to offload his stake in the english club.

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