CVS Group Plc is facing renewed pressure from activist investor Converium Capital, which is urging the UK veterinary care operator to launch a £100m share buyback following a period of weak stock performance, according to a report by the Financial Times.
Converium Capital, which has built a roughly 2% stake in CVS, is arguing that the company’s valuation has failed to recover even after UK competition authorities concluded a sector-wide investigation into pet care pricing practices. The fund has warned it could seek board representation if management does not respond to its demands.
In a letter to CVS’s board, Converium said a buyback would be an efficient use of capital given what it describes as a significantly undervalued share price. The proposal comes as CVS’s market capitalisation has declined to around £785m, with shares down more than 10% year-to-date.
The intervention follows a March ruling by the UK Competition and Markets Authority, which introduced reforms across the veterinary sector after identifying weak competition and elevated pricing. The measures affected several large operators, including CVS, and included greater pricing transparency requirements and limits on prescription charges for veterinary medicines.
Converium managing partner Michael Rapps has criticised the market’s reaction since the conclusion of the regulatory review and CVS’s inclusion in the FTSE 250 index, arguing that the company continues to trade below intrinsic value despite owning a broad network of nearly 500 clinics and a higher-margin diagnostics business.
The hedge fund contends that CVS is being valued as a small-scale operator rather than a diversified international veterinary group with operations extending beyond the UK, including clinics in Australia. It also points to a valuation gap versus private-equity-backed peers in the sector.
Under Converium’s proposal, a £100m buyback would still allow CVS to maintain flexibility for acquisitions of up to £45m while staying within its stated leverage and debt parameters. The fund argues that repurchasing shares at current levels represents the highest-return use of capital available to the company.
CVS has reportedly not yet publicly responded to the proposal.
Converium Capital, founded in 2020 by former Fir Tree Partners investor Aaron Stern, has previously pursued activist campaigns in the UK and abroad, including unsuccessful attempts to push Foxtons Group Plc toward a sale. The fund has also taken activist positions in major Japanese corporations such as Toshiba and Kirin Holdings.
