| NEW YORK, April 11
NEW YORK, April 11 Private equity firm
Blackstone is set to launch a $4.2 billion financing to
back its $5.4 billion acquisition of auto parts maker Gates
Global. The deal is the second-largest U.S. leveraged buyout
financing of the year, according to Thomson Reuters data, and is
also the largest private equity buyout of an industrial company
in more than four years.
The loans are being provided by Citigroup, Credit Suisse,
Deutsche Bank, Goldman Sachs, Morgan Stanley and UBS.
The financing, which is second in size only to the $7.6
billion credit backing Cerberus Capital Management's acquisition
of Safeway in early March, will be split between loans and
bonds, people familiar with the matter said.
The facility is expected to be welcomed by bankers and
investors who are hungry for large M&A financings to sink their
teeth into after a dearth of large-sized deals this year.
"The market is really anxious to see more of these larger
deals, and new-money deals come to the market," a loan banker
The third- and fourth-largest leveraged buyout financings of
2014, after Gates, are MultiPlan's $2.275 billion deal, led by
Barclays and JP Morgan, and Johnson & Johnson Ortho-Clinical
Diagnostics' $4.15 billion financing, led by Barclays and
Although sizeable, buyout deals reaching the market this
year are far smaller than some of the deals that launched in
2013, such as computer maker Dell's $9.122 billion take-private
financing and $12 billion of loans backing food processing giant
HJ Heinz's $12 billion buyout.
Leverage through Gates Global's bank debt is expected to be
about five times. Leverage through the bonds is expected to be
seven times, which suggests a split of 70 percent bank debt and
30 percent bonds. The bank debt will include a revolving credit,
a term Loan B and a bridge loan, which is expected to be
refinanced with high yield bonds.
After months of negotiations, Blackstone agreed to purchase
Denver-based Gates, which manufactures power transmission belts
and fluid power products, from affiliates of Onex Corporation
and Canada Pension Plan Investment Board for $5.4
billion on April 4 after its owners ruled out an IPO.
Blackstone will purchase all the equity interests of
Pinafore Holdings, the parent company of Gates Corporation. The
transaction is expected to close later this year and is subject
to customary closing conditions and regulatory approvals.
Blackstone is expected to make an equity contribution of
$1.6 billion, which is one of the biggest equity contributions
in a private equity buyout in the last few years.
(Editing By Jon Methven)