RLPC-Clayton looks for debt to back B&M stake

LONDON Tue Dec 4, 2012 1:18pm EST

LONDON Dec 4 (Reuters) - U.S. private equity firm Clayton, Dubilier & Rice is in talks about raising debt to help pay for its acquisition of a controlling stake in British discount retailer B&M, bankers said on Tuesday.

The deal, which values B&M at 965 million pounds ($1.55 billion), will be backed by roughly equal amounts of debt and equity, bankers said.

While CD&R has debt financing in place from Bank of America Merrill Lynch, it wants to expand the group of banks that will provide around 450 million pounds debt to back the transaction.

B&M, owned by brothers Simon, Bobby and Robin Arora, has over 300 stores throughout Britain and employs over 10,000 staff. The Liverpool-headquartered group sells a range of products including toys, furniture and foodstuffs, according to its website which describes itself as a variety retailer.

Banks which are close to the deal include Credit Suisse, Goldman Sachs, ING and Royal Bank of Canada, banking sources said, adding lenders were due to be appointed later this week and the debt will be syndicated to institutional loan investors in January.

The debt package will be provided through senior leveraged loans and will total around 4.25-4.5 times B&M's approximate 100-110 million pounds EBITDA (core earnings).

CD&R won the auction process after final round bids were submitted last week. Other private equity firms that had been interested included Advent, Blackstone, BC Partners and KKR, as private equity firms spotted value in a discount retail sector benefiting from a tough economic environment.

B&M was advised by Rothschild and CD&R was advised by Bank of America Merrill Lynch.

Former Tesco chief executive Terry Leahy, who is a senior operating adviser at CD&R, will serve as chairman of B&M.