Dechra profit warning could put private equity takeover at risk

Pet medicine and vaccine maker Dechra put out a second profit warning in three months today, putting a potential buyout at risk, after a number of US wholesalers cut back on stocking its products.

The firm, which acquired Ivermectin maker Med-Pharmex last year, warned that “widely reported destocking” in the US was hitting its profits in February, but now said that this has been lasting longer than previously expected.

As a result, it now expects profit of £186 million for the year to 30 June — £2 million less than it said in a February profit warning.

The pharmaceuticals company is currently in talks with Swedish private equity firm EQT over a £4.6 billion takeover. But with shares down 7.1% to 3,392p, investors believe EQT may decide against submitting a firm bid by next week’s deadline.

“The board is confident that the group remains very well positioned to continue to grow over the medium and longer term despite the unprecedented and, by nature, short term trading headwinds,” the Dechra board said. “The fundamentals of the business and strategy remains strong, our underlying markets remain in structural growth, we continue to grow in our chosen markets and we have an established, highly experienced and focused management team.

“Our strategy is robust, including  a very attractive development pipeline of new products to underpin our future growth, supported by a strong balance sheet.”