UDG Healthcare takeover likely to proceed, says RBC Capital

(Sharecast News) - RBC Capital Markets downgraded its stance on shares of UDG Healthcare from 'outperform' on Thursday as it lifted the price target to 1,023p from 940p, bringing it in line with the offer received by private equity firm Clayton, Dubilier & Rice, which it reckons will go through.
The bank said its leveraged buyout model implies that spinning off Sharp early and driving some cost synergies with Huntsworth could lead to a mid-20s internal rate of return for CD&R, implying that they could afford to pay more.

"However, with few large-enough private equity firms that own assets in this space, the UDG board recommendation, as well as little risk of unmanageable antitrust issues given the fragmented nature of the market, we continue to believe that shareholders will accept CD&R's 1,023p/share bid," RBC said.

"This becomes our new price target, with our rating falling to 'sector perform'."

UDG announced on Wednesday that it had agreed to be taken private by C,D&R in a £2.6bn deal.