| HONG KONG
HONG KONG U.S. private equity firms Blackstone Group LP (BX.N) and TPG Capital TPG.UL 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 bids.
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 process.
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 economy.
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 PACT.
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 (BARC.L) and Credit Suisse CSGN.VX.
"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 (APO.N) and Oaktree Capital turned to the U.S. markets to recapitalize 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.
($1 = 0.9746 Australian dollars)
(Additional reporting by Denny Thomas; Reporting by Stephen Aldred; Editing by Daniel Magnowski and Jason Neely)