April 9, 2019 / 2:02 PM / 6 months ago

Bankers ready SFr4bn debt deal for Nestle’s Skin Health sale

LONDON, April 9 (LPC) - Bankers are lining up around SFr4bn-equivalent (US$4bn) of debt financing to back a potential sale of Nestle’s Skin Health division as would-be buyers ready second round bids, banking sources said on Tuesday.

Nestle launched a review of the business in September, and hired Credit Suisse and Evercore to run a sale process that could fetch SFr7bn for the entire Skin Health unit.

“Everyone is focusing on Nestle Skin Health. It’s a big one,” a senior banker said.

The Skin Health unit includes medical and consumer businesses. The medical business includes prescriptions and aesthetics under the Galderma brand, and the consumer business includes the Cetaphil and Proactiv brands.

Second rounds bids from a mix of trade buyers and private equity firms are due on May 13 in an auction process. Some have been invited to bid for the whole business and others for either the medical or consumer businesses, the sources added.

Potential buyers include two private equity led consortia. Advent, Cinven and GIC are bidding together, while EQT has teamed up with Abu Dhabi Investment Authority. Separately Carlyle, KKR, PAI Partners and TPG are also through to the second round, the sources said.

Nestle declined to comment. The rest of the potential buyers declined to comment or were not immediately available to comment.

Strategic trade buyers interesting in buying the business include Unilever, Colgate-Palmolive and L’Oreal , the sources added.

Trade buyers are more likely to be attracted to the consumer business, the sources said, adding that private equity firms could bid for both the medical and consumer businesses or table separate bids.

“The most obvious play for trade is the consumer business. Private equity knows drugs and medical, but they also know consumer so it is not out of the question they could go for both,” a second senior banker said.

ON THE TABLE

A debt financing of around SFr4bn would give leverage of around 6.5 times the division’s Ebitda of approximately SFr550m, the sources said.

Up to 80% of the debt financing (US$3.2bn) is expected to be denominated in US dollars, with the rest denominated in euros, the sources said.

Given the large size of the deal, the financing could be structured with senior and junior leveraged loans and high yield bonds.

“It is a large financing so everything will be considered and nothing is off the table,” a third senior banker said.

The debt financing could be launched to the market before the summer if the disposal timetable stays on track, one of the sources said.

The debt financing is expected to be welcomed by lenders and investors who are eager to lend to new buyouts, which have been in thin supply in 2019 so far.

First quarter leveraged loan volume and high yield bond volume plummeted after December’s volatility and uncertainty over Brexit took a toll on activity. (Editing by Tessa Walsh)

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