LONDON Feb 14 Bankers are preparing a debt
financing of around €2.6bn backing a potential private equity
buyout of publicly listed German generic drugs and consumer care
group Stada, banking sources said on Tuesday.
Stada said on Monday that it had started talks with
potential bidders Cinven Partners and Advent International,
after the private equity firms showed interest.
Banks are eager to underwrite a large and profitable debt
deal, which would give lenders a welcome break from the
low-earning task of repricing and refinancing existing loans.
“Every bank is looking at Stada. You don’t get a jumbo trade
very often so as soon as something hits the screen like this,
you get on it,” one source said.
Around €2.6bn of debt financing would give a total leverage
ratio of around 6x-6.5 times, based on Stada’s approximate
Ebitda of €400m, sources said.
The debt is likely to be denominated in euros and the large
size of the financing means that it could be split between
leveraged loans and high-yield bonds, they added.
Europe’s leveraged loan market could have the upper hand,
sources said, as public to private acquisitions can take a long
time to close.
Loans are more flexible and have less rigid accounting
standards than bonds and can be arranged either as a bridge
financing or syndicated to investors with a ticking fee.
While the liquid loan market has the capacity to bank a
jumbo deal, several other large loans are also on the horizon,
including the potential sale of German metering groups Techem
and rival Ista.
The two potential sales would require around €2bn of
financing each and, if successful, could quickly reverse
technical market factors that have seen demand outstrip supply
for around a year.
“Europe’s leveraged loan market could go to feast from
famine very quickly,” the first source said.
Stada said that Cinven was offering 56 euros per share,
which values the company at almost €3.5bn. It did not disclose
the price proposed by Advent.
Other cash-rich buyout firms including Bain, BC Partners,
CVC and Permira are also interested in Stada, sources said.
Stada was not immediately available to comment. Bain, BC
Partners, CVC and Permira declined to comment.
Founded in 1895 in Dresden as a pharmacists' cooperative,
Stada is seeking to expand its non-prescription consumer care
Its generic drug business is under price pressure as medical
insurers in Germany, its largest market, seek bulk procurement
deals at low prices.
(Editing by Tessa Walsh)