LONDON, June 29 (Reuters) - Bain and Cinven have yet to ask the underwriting banks to stand down on a €3.175bn jumbo buyout financing for Stada as they gear up to make a new offer for the German drugmaker, banking sources said.
Bain and Cinven’s initial €5.3bn takeover bid fell through after 65.52% of Stada’s equity signed up for the deal, below the 67.5% threshold required.
The financing was conditional on the buyout going ahead and should in theory have fallen away once the bid failed.
However, the financing remains in place for now and is expected to back any new bid Bain and Cinven are likely to make, the sources said.
A new bid could launch as early as next week and is likely to come before the summer if one is made, the sources said.
The private equity firms are expected to bid at the same price but lower the acceptance threshold to 65%, the sources said.
They will need the underwriting banks to approve the lower acceptance level in order to keep the same financing in place, the sources said.
The banks -- Barclays, Citigroup, Commerzbank, Jefferies, JP Morgan, Nomura, Societe Generale and UBS -- are expected to approve the lower limit, as they are keen to keep the profitable financing in play, the sources said.
“The banks will be more than eager to finance this deal -- the whole of the market wants to buy it,” one of the sources said.
Any new bid launched within a year needs recommendation from Stada’s executive and supervisory boards.
The 65% threshold is likely to be an attractive proposition, as it gives a high level of certainty a second offer will be successful, enabling Stada to avoid the embarrassment and repercussions of another failed bid.
Bain and Cinven declined to comment. Stada was not immediately available to comment.
As potentially Europe’s largest leveraged financing so far this year, it has been highly anticipated by both loan and high- yield bond investors. They have been starved of new money opportunities and are eager for the chance to soak up excess liquidity and reverse the supply/demand imbalance that has plagued the market.
The underwritten financing comprises a €1.95bn seven-year senior secure term loan B; €485m of seven-year senior secured fixed rate bonds; €340m of eight-year senior unsecured fixed rate notes; and a €400m seven-year revolving credit facility.
The underwriting banks are set to recieve €60m of fees altogether -- around €7.5m each -- based on a 2% underwriting fee.
A fee of this size is unprecedented so far this year after a flood of unprofitable and time consuming repricings and refinancings.
A second bid is expected to gain ground from a number of hedge funds that only tendered a minimum number of shares the first time round. They held back shares either because they viewed being a minority shareholder as an economically attractive trade or because they speculated on securing a higher price for any remaining stock after a successful initial tender offer.
A second offer is likely to see the hedge funds tender a larger number of shares, having lost money after Stada’s share price fell following the failed sale, the sources said.
“It was high stakes poker that didn’t work. The hedge funds are sitting on losses and might be willing to tender more in renewed bid,” a second source said.
Once the acceptance level is met, index funds accounting for a chunk of the shareholder base are expected to sell their shares.
“It is impossible for them to tender as they can only really sell when liquidity in the stock is below a certain level. They will sell shares once the conditional acceptance is met,” the second source said.
The tender offer for the agreed €5.3bn deal at €66 per share was made conditional on securing 67.5% of the shares, after the minimum acceptance threshold was lowered earlier in June from 75%.
For 2017, Stada expects sales adjusted for currency and portfolio effects of €2.28bn to €2.35bn, with adjusted Ebitda of €430m-€450m, Thomson Reuters reported previously. (Editing by Christopher Mangham)
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