April 5, 2012 / 3:02 AM / 5 years ago

Australia's PEP may hike $729 mln Spotless bid after securing funding-sources

SYDNEY, April 5 (Reuters) - Australian buyout fund Pacific Equity Partners (PEP) is considering raising its A$711 million ($729 million) offer for services company Spotless Group after securing the bulk of its funding, four sources with direct knowledge of the deal said.

PEP is in the final stages of due diligence on Spotless and may raise its offer a touch to secure board recommendation for the bid, said one of the sources, all of whom declined to be identified as matter is confidential.

Three of the sources said PEP has secured more than A$500 million in leveraged loans to back the deal, which has been in the works since late last year.

A spokesman for PEP declined comment while Spotless could not immediately reached for comment.

Spotless has maintained it will not back an offer below A$743 million, or A$2.80 a share, compared to PEP's last offer of A$711 million, or A$2.68 a share.. Spotless shares were trading 0.8 percent lower at A$2.38 in afternoon Sydney trade.

PEP has been inspecting Spotless' books since February, when the target company relented to open its books after pressure from institutional investors.

PEP has put together a buyout loan leveraged at around 3.5 times earnings before interest taxation depreciation and amortisation (EBITDA) from a large group of lenders, according to the sources.

The financiers include Australia and New Zealand Banking Group, Citi, Commonwealth Bank of Australia, Credit Agricole CIB, Investec, HSBC, Mizuho Corporate Bank, National Australia Bank and Westpac Banking Group.

Spotless is currently leveraged at around 1.5-2 times according to publicly available information. The company in January refinanced an existing A$240 million loan with ANZ, CBA and HSBC, according to data from Thomson Reuters Loan Pricing Corp.

Spotless has been a target for buyout firms for nearly a year. Last May it rejected an A$657 million offer from Blackstone

Citigroup and Investec Bank are advising PEP on the bid. Goldman Sachs is advising Spotless.

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