(Corrects para 2 to say Morrisons' founding family has
contacted buyout firms, not Morrisons)
By Claire Ruckin
LONDON Feb 19 Bankers are working on debt
financing packages of around 5 billion pounds ($8.35 billion) to
back a potential sale of British supermarket chain Wm Morrison
Supermarkets to private equity funds, banking sources
said on Wednesday.
The founding family of Morrisons, which own a 9.5 percent
stake, has contacted buyout firms to guage their interest in
taking the business private after a fall in Christmas sales.
Cash-rich private equity firms are keen to do new buyouts
after low levels of M&A activity in 2013, although the large
size of this deal may mean that they have to work together,
"The size of the transaction, which could get as high as 10
billion pounds, could require a number of private equity players
to team up, given the size of the equity cheque needed," a
senior leveraged loan banker said.
Morrisons declined to comment.
Bradford-based Morrisons, which is the UK's fourth-largest
supermarket operator, was founded in 1899 and listed on the
London Stock Exchange in 1967.
Morrisons, which has lucrative property assets, has already
been considered as a takeover target by CVC, which studied a
potential bid in 2007.
Morrisons' shareholders and retail analysts are doubtful
that a take-private deal will happen but bankers and sponsors
have been in talks for more than a month to see if the financing
is theoretically possible, a second banker said.
A debt package of around 5 billion pounds would be one of
the largest buyout financings since the financial crisis. A
financing would be a mix of loans and high-yield bonds in
sterling, dollars and euros to maximise liquidity, two bankers
The loan component is expected to have an 'opco-propco'
structure which is commonly used on loans for companies with
property assets. Property company debt is serviced with rent
payments from an operating company, they added.
($1 = 0.5989 British pounds)
(Editing by Tessa Walsh)