* Famous British brands expected to fetch over 1 billion stg
* Debt to back deal could total as much as 700 mln pounds
By Claire Ruckin
LONDON, July 25 Bankers have started to prepare debt financing packages to offer to potential buyers of GlaxoSmithKline's soft drink brands Lucozade and Ribena, banking sources said on Thursday.
JP Morgan and Greenhill were appointed in May to advise on the sale of the pair, both household names in Britain, which are expected to fetch more than 1 billion pounds ($1.54 billion).
GSK said on Wednesday its plan to divest the brands remained on track and it expected a deal by the end of the year. Bankers said the sale could be one of the highest-profile deals in the fourth quarter.
"Ribena and Lucozade will be one of the hotter assets that come up for sale as everyone knows the brands and how good they are. Therefore bankers should be able to offer attractive debt terms to potential buyers," one banker said.
Bankers are eager to do the deal after a lack of M&A so far this year and are willing to be aggressive, working on debt packages of up to 6.5-7 times Ribena and Lucozade's leverage.
Their earnings before interest, tax, depreciation and amortisation (EBITDA) are estimated around 90-100 million pounds, meaning debt to back the deal could total as much as 700 million pounds, bankers said. This is expected to be in the form of senior leveraged loans and subordinated debt, denominated in sterling and euros, they added.
As sellside adviser, JP Morgan is also likely to offer a staple financing package which offers any potential buyer confidence that debt will be available to back a buyout.
The sale of Lucozade and Ribena - which are big sellers in Britain but lack global reach - is expected to attract interest from both drinks companies and private equity houses, the former potentially including Irn Bru-maker A.G. Barr and Japan's Suntory Holdings. [ID: nL5N0EN0HA]
Among buyout firms, candidates include Blackstone and Lion Capital, which could submit a joint bid, BC Partners , PAI, Bain Capital, CVC Capital Partners and KKR.
Lucozade and Ribena no longer fit well in GSK's portfolio, since the company is focusing its consumer health operations increasingly on emerging markets, where both brands are relatively weak.
Both are veteran products - Lucozade was launched in 1927 and Ribena just 10 years later - but remain popular. Although GSK does not break out detailed sales for the two brands, they bring in nearly 600 million pounds a year, with much of that generated in Britain.