* Deal could value Inghams at around $821 mln -sources
* Could mark first time since 2007 a U.S. loan used in an
* U.S. funding offers looser terms, more leverage to buyouts
By Stephen Aldred
HONG KONG, March 7 U.S. private equity firms
Blackstone Group LP and TPG Capital have placed
separate final bids for Australia's largest poultry producer,
Inghams Chicken, sources with direct knowledge of the matter
told Reuters on Thursday.
The bids could value the privately owned company at around
A$800 million dollars ($821 million), two sources said.
Ahead of Thursday's deadline, Blackstone and TPG both
submitted final bids backed by bank financing, with Blackstone
tapping funding from U.S. markets and TPG using a consortium of
commercial banks, the sources added.
It was not immediately known if other parties have submitted
Bob Ingham, sole shareholder of Inghams Enterprises, which
owns the Ingham Chicken brand, put the poultry producer up for
sale in July last year and hired Investec Bank to run the sale
Australian food manufacturers have been highly sought after
by private equity and other Asian buyers in the past two years
due to resilient sales and solid cashflows, despite a slowing
A successful deal would give a boost to Australia's buyout
market, which has seen a series of auctions either delayed or
postponed, including Links Market Services and packaging group
For the first time since 2007 private equity firms in Asia
are turning to U.S. loan markets to finance buyout deals,
underscoring the return of risk appetite among investors.
The firms are hoping that liquidity in U.S. loan markets can
help them buy more and bigger assets, and are closely watching
Blackstone's bid, which is backed by dollar funding from the
U.S. arranged by Barclays and Credit Suisse.
"If you can access the U.S. market that opens up more
opportunities than we have seen in recent years because we can
do larger financing and larger deals," Justin Reizes, managing
director at KKR Australia, told the AVCJ Australia & New Zealand
conference on Thursday.
Reizes added that the deal pipeline in Australia was looking
better than it had for several years, with a number of potential
corporate carve-outs coming.
"If you get similar leverage levels to the U.S. it opens up
public-to-private opportunities as well," Reizes said.
Australia's commercial banks refuse to lend more than around
50 percent on any deal, which is prompting the move to tap U.S.
funding. Despite the higher cost of U.S. financing, higher debt
levels increase returns when private equity firms exit an asset.
Since private equity firms do not have to use as much of
their own equity, it also offers the potential to acquire more
assets out of one fund.
Typical commercial loans provided by the lenders feature
regular tests on earnings, which if violated can allow lenders
to accelerate repayments. U.S. loans offer more flexible terms
to the borrowers.
Late last year, Apollo Global Management and Oaktree
Capital turned to the U.S. markets to recapitalise debt at Nine
Entertainment in Australia, Basis Point reported.
But this would be the first time such debt has been used to
directly buy an asset.
Barclays did not immediately respond to calls seeking
comment. Blackstone, Credit Suisse and TPG declined comment. A
call to Ingham's Sydney office was not answered. The sources
could not be named as details of the deal were not public.