Iceland Foods founder closes in on $2.4 billion buyout

LONDON Thu Feb 16, 2012 3:52pm GMT

Related Topics

Quotes

   

LONDON (Reuters) - Failed Icelandic banks Landsbanki and Glitnir helped Malcolm Walker beat private equity firms to exclusive talks to buy Iceland Foods, a deal that would value the retailer he founded at 1.55 billion pounds ($2.4 billion).

The two banks are providing Walker with a 250-million pound loan, people close to the matter said. That made his offer more valuable and edged out bids from Bain and BC Partners.

Chief executive Walker -- who founded the company in 1970 -- owns 23 percent of the frozen food retailer along with other managers, and has entered six weeks of exclusive talks to buy the remaining 77 percent from the two banks.

"The reality is that Malcolm Walker could increase his price, and had less conditions attached to his offer than the private equity firms," one of the sources said.

Bain and BC Partners declined to comment.

Walker aims to finalize his financing package over the next few weeks, the person said, and hopes to gain more favorable terms from banks that were expecting to back the losing bids.

Though nothing has been decided, lenders in contention for the debt deal include UBS (UBSN.VX), Bank of America Merrill Lynch (BAC.N), Deutsche (DBKGn.DE), Nomura (9716.T) and Societe Generale, banking sources said.

Blackstone GSO, the credit arm of Blackstone Group (BX.N), is likely to provide mezzanine debt if this is in the final structure, the sources said.

Mezzanine is a more expensive form of financing on offer from specialist lenders.

Iceland, in a statement on Thursday, confirmed the grocer's management had signed an agreement with the sellers, which gives the chance to buy the company ahead of other possible bids.

Bain and BC Partners placed bids for the frozen food retailer this month, leaving Walker 42 days to match the highest bid under a shareholder agreement.

They were the final two external bidders in an auction that began last year and was hampered by competition issues which deterred interest from supermarket groups Wm Morrison (MRW.L) and Walmart's (WMT.N) Asda.

The Icelandic owners rejected a 1-billion pound bid by Walker in 2010 for their stakes.

UBS and Bank of America Merrill Lynch advised the Icelandic banks. Rothschild worked for Malcolm Walker.

Landsbanki in an e-mailed statement, said it and Glitnir had signed a deal with firms owned by the leadership of Iceland Foods, including Walker.

"It is expected that a formal sale agreement will be signed shortly and the banks will issue statements regarding the process," Landsbanki said.

($1 = 0.6372 British pounds)

(Additional reporting by Stephen Mangan and Claire Ruckin in London and Omar Valdimarsson in Reykjavik,; Editing by Muralikumar Anantharaman, Hans-Juergen Peters and David Hulmes)

FILED UNDER: