Jupiter chief says buyout firms shouldn’t be blamed for UK raid


The head of Jupiter, one of Britain’s best-known asset managers, has defended the UK corporate private equity sector’s record-breaking pursuit, arguing that cheap valuations will make companies “vulnerable”.

A wave of deals has drawn strong criticism from some traditional asset managers who claim that targeting the UK market, which was hit by Brexit and then the pandemic, left shareholders in the dark.

The buyout groups have bought or announced offers for around 366 UK companies, including private companies, so far this year, the most for a comparable period since the record began in the 1980s, according to Refinitiv.

“I don’t blame private equity firms,” said Andrew Formica, chief executive of Jupiter. “The fact that we’ve seen so many offers from private equity managers over the past six months shows that the value offered by UK equities is absolutely compelling.”

With interest rates at record highs, pension funds are allocating more and more money to buyout companies looking for higher returns. This left the private equity industry with $ 1.7 billion in dry powder and faces pressure to spend it.

“The offerings of private equity firms have spanned a wide variety of industries, not limited to any particular industry,” Formica said. “This will continue as long as the valuation mismatch between the UK and other stock markets persists. UK companies are clearly vulnerable.

The British market was trading on a multiple of 14.1 times the estimated profits for this year, against 19.3 times for Europe and 23.7 for the US market at the end of June, according to Société Générale.

Since stocks hit their pandemic low in March 2020, the UK market has lagged its rivals. The blue-chip FTSE 100 index climbed 40.3% during the period, while the S&P 500 was up 93.5% and the European benchmark Stoxx 600 is up more than 60% .

The £ 9.5 billion buyout this month of Wm Morrison, Britain’s fourth-largest supermarket chain, by a group led by US-based Fortress has been the lightning rod of criticism of the forays the food industry has made. buyout made in British companies.

The deal with the Fortress consortium follows Morrisons’ rejection last month of an offer from private equity manager Clayton, Dubilier & Rice. U.S. buyout group Apollo also said it was evaluating an offer for the chain.

Legal & General, the UK’s largest asset manager, warned the supermarket group should not be acquired for “the wrong reasons”, such as profiting from its property portfolio. Fortress has pledged to keep Morrisons headquarters in Bradford and to protect pensions.

Addressing the deal with Morrisons, Formica said that “UK supermarkets are world-class companies that have performed phenomenally during the pandemic,” adding: “But their shares were trading at lower valuations than there was. at two or three years old. It’s crazy. ”

Real estate group St Modwen, infrastructure investor John Laing, electricity supplier Aggreko, AA car breakdown service and debt collector Arrow Global are among other UK companies to have recently received offers from equity firms. -investment.

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