June 27, 2012 / 4:35 PM / 6 years ago

Buyout duo drop new bid, freezing Iglo sale: sources

LONDON (Reuters) - Blackstone (BX.N) and BC Partners BCPRT.UL will not table a fresh bid for frozen foods group Iglo, leaving owner Permira PERM.UL in control of the subject of one of Europe’s largest buyouts and eyeing a refinancing to pay itself a hefty dividend, people familiar with the situation said.

The decision by Blackstone and BC Partners not to come back with a higher offer ends the chances of what would have been the largest buyout of this year and underlines the fragility of new deals in what remains a patchy private equity deals market.

Permira rejected BC Partners’ and Blackstone’s 2.5 billion euro ($3.1 billion) joint bid earlier this week, after it fell well short of the firm’s 2.8 billion euro price expectation.

Following the rejection, the pair - who were the last remaining bidders in the sale process run by Credit Suisse - had considered a higher bid for the company, people said.

However, the two buyout firms are not prepared to improve their offer, two people said, putting an end to the sale process.

BC and Blackstone teamed up last week before tabling a binding bid. The move was seen as a way of splitting the large equity investment and potentially forcing down the price.

While a handful of recent deals, such as KKR’s (KKR.N) agreement to sell Alliance Boots, have spurred hopes of a private equity revival, data show a slow year for the professional dealmakers.

Overall, new private equity deals are down 19 percent on last year to $103 billion globally and sales of companies are down 26 percent to $145 billion, according to Thomson Reuters figures.


The end of the Iglo sale process will leave Permira looking at other options for the company it bought in 2006 from Unilever (ULVR.L) for 1.7 billion euros, later bolting on Findus Italy for a further 800 million.

    One such option could be refinancing Iglo’s debt to raise money to pay Permira a dividend, people have said.

    Bankers who had been working on a financing package of up to 2.4 billion euros to back a new deal believe a so-called dividend recapitalization is a viable option, despite the fact they have been little used since the credit crisis.

    The process of refinancing companies to pay buyout firms dividends became controversial as high debt levels hampered many companies’ ability to grow and left lenders facing the prospect of losses on debt they had issued.

    At the end of 2011, Iglo had net debt of some 1.4 billion euros, equating to around four times the company’s projected 2012 earnings before interest, tax, amortization and depreciation (EBITDA) of about 350 million euros.

    While a new deal for Iglo could have attracted a debt package of around six times its annual earnings, increasing Iglo’s debt by some 700 million euros, banks could be reticent about providing that much in a refinancing, particularly when there had been such a difference of opinion over price between buyer and seller, the banker said.

    The end of the sale will leave Permira to support a growth strategy for Iglo which involves expansion deeper into Europe and further acquisitions.

    BC Partners, Blackstone and Permira declined to comment. ($1 = 0.8028 euros) (Additional reporting by Claire Ruckin; Editing by David Holmes)

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