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On 4 April 2022, global asset management firm DBAY Advisors Limited (DBAY) that it submitted an indicative proposal to CareTech Holdings plc (CareTech) regarding a possible all-cash offer to acquire the AIM-listed company’s entire issued, and to be issued share capital. This approach has topped an earlier approach from the sibling co-founders of CareTech, Farouq and Haroon Sheikh.

It was on 7 March 2022 that Farouq and Haroon Sheikh, who founded CareTech in 1993, were in the early stages of forming a consortium, Sheikh Holdings Group (Investments) Limited), for the purpose of considering making a possible offer for CareTech. The brothers, who hold executive chairman and CEO titles, own a minority stake in the business themselves, but need to raise further funds in order to make a formal offer, sparking rumours that they were also in discussions to secure the financing required to launch a takeover bid which will see CareTech de-listed from the London Stock Exchange.

Following the announcement, the company formed an independent group of board members to consider any proposal made by the consortium. CareTech that the brothers had proposed a revised possible offer at £7.25 per share and announced:

‘The Independent Directors, having evaluated the Revised Proposal together with their advisers, have confirmed to the Consortium that the Revised Proposal is at a value the Independent Directors would be minded to recommend should an offer be made at that price, subject to satisfactory resolution of the other terms of the Revised Proposal.’

Despite the board recommendation for the Sheikh Holdings proposal, DBAY on 4 April 2022 that it had submitted an indicative proposal to CareTech for £7.50 per share, representing a 3.4% premium to the revised Sheikh Holdings proposal. DBAY also announced:

‘The possible offer includes a partial non-voting share alternative to allow shareholders to roll-over some of their investment and retain an interest in CareTech's future should they choose to do so (the Alternative Offer). The Alternative Offer is limited to 30% of the issued capital. DBAY looks forward to engaging constructively with CareTech and its management team and working towards the announcement of a recommended transaction.’

The Isle of Man-based asset manager also confirmed that funds managed or advised by DBAY had acquired 2,028,084 CareTech shares in total, equivalent to approximately 1.8% of its issued share capital. The highest price paid was £7.10 per share therefore, according to the Rule 6.1 of the Takeover Code, any formal offer made by DBAY must be on no less favourable terms (see Practice Note: (a subscription to Lexis®PSL Corporate is required)).

CareTech to the new possible offer on 4 April 2022, confirming that it was in early-stage discussions with DBAY in relation to the proposal but there was no certainty that a formal offer will be made. The CareTech independent directors advised shareholders to take no action as a result of the announcement.

Whether the Sheikh brothers or DBAY proceed to a firm offer and emerge victorious, the takeover of CareTech would be the latest in a string of ‘public-to-private’ (P2P) takeover transactions which accounted for 34 (64%) of the 53 firm offers announced in 2021 (see: Private equity pounces on UK companies in recent takeover bids). 

Our Public M&A Q1 2022 update will explore the increasing trend of P2P transactions seen throughout last year and in this quarter in more detail, to be published this month.

The put up or shut up (PUSU) deadline, by which each DBAY and Sheikh Holdings are required to announce whether or not they have a firm intention to make an offer is on 2 May 2022.