Alliance Pharma to be Acquired in £349.7 Million Deal, Underscoring UK Stock Market’s Vulnerability
The London Stock Exchange is poised to lose another publicly traded company as Alliance Pharma, a global marketer and distributor of consumer healthcare and prescription products, has agreed to a £349.7 million ($427 million) all-cash acquisition by a consortium led by DBAY Advisors and Edmond de Rothschild’s ERES IV fund. This deal highlights the growing trend of UK-listed companies, particularly those on the Alternative Investment Market (AIM), becoming targets for private equity firms and other investors seeking undervalued assets in a challenging market environment. Alliance Pharma’s departure further shrinks the UK stock market, raising concerns about its long-term health and competitiveness.
Alliance Pharma, which has been listed on AIM since 2003, boasts a diverse portfolio of healthcare products and a global reach, serving customers in over 100 countries. Employing approximately 285 individuals across its offices in Europe, North America, and the Asia-Pacific region, the company has undergone a strategic review of its operations under the leadership of its recently appointed CEO, Nick Sedgwick. While the board expressed confidence in the company’s long-term potential, they also acknowledged the significant time and investment required to execute their strategic plan, coupled with uncertainties surrounding its successful implementation. This backdrop of challenges likely made the company more susceptible to an acquisition offer.
The acquisition, offering shareholders 62.5 pence per share, represents a substantial 41% premium over Alliance Pharma’s closing price on Thursday, a compelling incentive for shareholders to approve the deal. The company’s board has unanimously recommended that shareholders vote in favor of the acquisition, signaling their belief that the offer provides fair value and represents the best course of action for the company’s future in the face of the aforementioned challenges. The acquisition comes as the UK stock market grapples with a wave of takeovers, raising concerns about its shrinking size and diminished attractiveness to investors.
DBAY Advisors, a private equity firm based in the Isle of Man, initiated its acquisition of Alliance Pharma shares in December 2022 and currently holds a 28% stake in the company. Partnering with DBAY in this transaction is Edmond de Rothschild, a prominent Geneva-based private bank and asset manager with a vast portfolio exceeding $177 billion in assets under management. This collaboration brings together significant financial resources and expertise, further demonstrating the attractiveness of UK-listed companies to sophisticated investors seeking growth opportunities. DBAY has expressed its support for Alliance Pharma’s current leadership team but intends to implement a series of initiatives, coupled with new investments and potential acquisitions, to drive further growth and value creation. They believe that operating outside the pressures of the public market will allow the company the necessary time and flexibility to implement these strategies effectively.
The acquisition of Alliance Pharma underscores a concerning trend in the UK stock market, where a significant number of listed companies, particularly those on AIM, have become targets for takeovers. According to Peel Hunt, a leading investment bank, one in twenty UK-listed companies received a public takeover offer in 2024. This increased vulnerability stems from factors such as reduced liquidity, depressed valuations, and limited access to capital markets, making these companies attractive targets for private equity firms and other investors. This trend raises questions about the future of the UK stock market and its ability to attract and retain high-growth companies.
The shrinking size of the UK stock market poses several potential risks to the broader economy, including reduced investment opportunities for domestic and international investors, decreased capital formation for businesses, and a decline in the UK’s overall competitiveness in the global financial landscape. This situation calls for proactive measures to address the underlying factors contributing to the exodus of listed companies and to create a more supportive environment for businesses seeking to access public markets. The Alliance Pharma deal, while offering immediate value to shareholders, potentially represents a broader challenge for the UK’s capital markets and their ability to foster growth and innovation. The long-term implications of this trend merit careful consideration and may require regulatory intervention to ensure the UK remains a vibrant and attractive destination for businesses seeking access to capital.
