May 4, 2018 / 1:38 PM / in 2 months

Blackstone's F&R acquisition to close in late summer

LONDON (LPC) - US private equity firm Blackstone Group’s US$20bn acquisition of a majority stake in Thomson Reuters’ (TRI.TO) Financial and Risk (F&R) unit is expected to close in late summer as regulatory requirements make a targeted July 1 completion look increasingly unlikely, sources familiar with the matter said.

FILE PHOTO: The ticker and trading information for Blackstone Group is displayed at the post where it is traded on the floor of the New York Stock Exchange (NYSE), New York, NY, U.S., April 4, 2016. REUTERS/Brendan McDermid/File Photo

The acquisition is expected to close in September, most likely at the end of the month, which is also the end of the third quarter, several sources said.

“It is likely to slip to September. It is easier to close at the end of the quarter when the numbers come through,” a senior source said.

A deadline of the end of July has been set for EU approvals and the deal could close earlier if it gets swift regulatory approval, the sources said.

Thomson Reuters said on May 2 that the acquisition is expected to close in the second half of the year and is subject to specified regulatory approvals and customary closing conditions. The company will report its first-quarter earnings on May 11, 2018.

Blackstone announced on January 30 that it is buying a 55% stake in Thomson Reuters’ F&R unit, which includes LPC and IFR.

A US$13.5bn-equivalent loan and bond financing backing the acquisition is expected to launch in early September, after the market reconvenes after the August summer holiday.

“The debt deal will come in early September. They will get back from holiday, do a roadshow then launch,” the senior source said.

The deal, which is being led by JP Morgan, Bank of America Merrill Lynch and Citigroup, is the biggest buyout financing since the financial crisis.

A post-summer syndication will leave the underwriting banks on risk over the holiday period, something which is becoming more common as large cross-border acquisitions run into increasingly lengthy regulatory approval processes.

The three lead banks reduced their risk when 21 senior banks were signed into the deal in March and underwrote 28% of the transaction. Invitations to participate in the deal at this level were linked to the amount of business that banks do with Thomson Reuters.

Blackstone was able to command favorable financing terms when the deal was put in place before a period of increased market volatility in February, but step ups in market flex terms and debt caps have been included to give banks additional protection, several market sources said.

Thomson Reuters declined to comment. JP Morgan, Citigroup and BoAML declined to comment. Blackstone was not immediately available to comment.

DEAL STRUCTURE

The debt financing includes a US$8bn-equivalent term loan B, which is split between US$5.5bn and US$2.5bn-equivalent in euros.

The financing also includes US$3bn-equivalent of secured bonds split between US$2bn and US$1bn-equivalent in euros, and US$2.5bn-equivalent of unsecured bonds split between US$1.8bn and US$700m-equivalent in euros. The company will also place a US$750m revolving credit facility.

Additional funding comes from US$1bn in preferred equity – with a 14.5% Payment-In-Kind (PIK) coupon – US$3bn of cash equity that Blackstone is contributing, and US$2.5bn of existing equity, based on the US$20bn valuation, that will be rolled over.

The currency splits may change depending on investor demand and the timing of the wider institutional syndication.

Additional reporting by Andrew Berlin and Davide Scigliuzzo; Editing by Matthew Davies

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