Bankers eager to finance a buyout of German drugmaker Stada Arzneimittel AG are considering a debt package as high as €6 billion ($6.3 billion), pegging the coveted deal as a bellwether for the market.
(Bloomberg) — Bankers eager to finance a buyout of German drugmaker Stada Arzneimittel AG are considering a debt package as high as €6 billion ($6.3 billion), pegging the coveted deal as a bellwether for the market.
Even though Stada’s private equity owners haven’t officially started the sale, the deal may be so lucrative that banks are moving early and at speed, said people familiar with the matter. There’s been a renewed sense of confidence among lenders to underwrite mergers and acquisitions after the success of buyout financings including Worldpay Inc. and Infra Group.
To be sure, the Stada talks are at a very early stage. Bain Capital and Cinven asked banks to pitch for roles on a possible transaction, which could value Stada at €10 billion or more, Bloomberg reported earlier this month. The expectation is that they will soon appoint advisers and launch a dual-track process to either sell the company directly or via an initial public offering, the people said, asking not to be identified because the matter is private.
Spokespeople for Bain and Cinven declined to comment. Stada didn’t immediately respond to a request for comment.
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Part of the reason that banks are acting quickly is that they’re keen to avoid losing out to private credit, as was the case when HPS Investment Partners swooped in with a €1.5 billion loan package to help fund the buyout of Constantia Flexibles GmbH in July.
In the case of Worldpay and Infra’s debt packages, both were met with strong investor demand and saw the size of the debt offerings increase and pricing tighten. And as market conditions improve, bankers say they’re able to offer more competitive and flexible financing terms.
For example, the leverage on deals has been steadily increasing. On Stada, if they secure some €5 billion to €6 billion of debt financing, that would equate to around 5.5 to 6.5 times debt to earnings, based on an approximate €900 million Ebitda. At that size, it’s likely that bankers would tap leveraged loans and high yield bonds in euros and dollars, the people said.
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