LONDON (Reuters) - Banks have lined up around £800m-equivalent of term loans to back UK-headquartered health food and supplements chain Holland & Barrett’s buyout by Russian billionaire Mikhail Fridman’s L1 Retail, banking sources said.
L1 Retail announced at the end of June it would buy Holland & Barrett from The Nature’s Bounty Co and The Caryle Group for £1.77bn.
Citigroup, HSBC and UBS are arranging the debt financing, which is expected to launch for syndication to investors before the summer. The £800m term loan will be denominated in sterling and euros, the sources said.
The overall debt size will be higher and could be closer to £1bn-equivalent, as it will also include undrawn loans such as a revolving credit facility, the sources said.
L1 Retail was not immediately available to comment.
Arranging banks generally try to avoid launching loans in the summer period as investors head to the beach, but with Holland & Barrett there is a belief that there are strong advantages to launching now rather than waiting until September.
First, the European leveraged loan market is very receptive as investors are eager for new paper after a large number of repricings and refinancings. There is less risk launching the deal now rather than holding the syndication risk on balance sheets and launching into unknown market conditions in September.
Also, as a new credit to the market, Holland & Barrett will require more research by investors, which means it is expected to take more time than a known name. They will also have to carry out due diligence on the owner, as it is not owned by a well-known private equity house, the sources said.
Banks will be keen to launch any new deal that requires more work before a number of potential large deals in the works gain investor attention such as a €3.175bn financing for German drugmaker Stada and a €2.5-€3bn financing for a possible sale of German metering and energy management group Ista.
“It doesn’t surprise me Holland & Barrett will come to the market before the summer. Given the ownership and the fact it is a new deal, it will want to tail off a hot market, rather than restart the market in September,” an investor said.
Private equity firm Carlyle acquired Nature's Bounty, including Holland & Barrett, in 2010 for US$3.8bn.
Reuters reported in January that Carlyle had hired Goldman Sachs to help it sell Nature's Bounty, but that it may opt to sell Holland & Barrett separately.
Originally founded in 1870, Holland & Barrett has grown to become Europe’s largest health and wellness retail chain with 1,300 shops in 16 countries.
Editing by Christopher Mangham