BPE and Investcorp pull off €800m deal

A partnership between Barclays Private Equity and Investcorp has defied the illiquid credit markets, raising just shy of €600m of debt to acquire N&W Global Vending.

Rejecting the stapled finance package attached to N&W Global Vending was instrumental in the buyers getting the €800m leveraged buyout away.

“We were suspicious that the conditions of the stapled finance, which had been agreed in June, wouldn’t actually still be available by the time it came to signing,” said Emanuele Cairo, head of BPE in Italy.

BPE and Investcorp began approaching lenders at the outset of the Rothschild-led sale process in June. They had previously tried to stage a pre-emptive deal by approaching private equity vendors Argan Capital and Merrill Lynch Global Private Equity late last year.

The conditions of the stapled package, underwritten by Merrill Lynch, Société Générale and Intesa Sanpaolo, began to change during the binding offer period but by that time, BPE and Investcorp had already secured commitments from a rival club of banks.

The deterioration in the financial climate required BPE and Investcorp to call on more banks, bringing the final number of mandated lead arrangers to eight and giving their bid credibility that counter-bidders, including one trade buyer, could not match.

During the process, both the price and debt available to the buyers fell.

“The buyers benefited from the fact that for banks this was one of the very few good deals on the market at the time,” said Saverio Rondelli from Compass Rondelli Advisers, adviser to BPE and Investcorp, who described N&W as a “crown jewel”.

Senior debt of €470m was jointly arranged by Bank of Ireland, Barclays, BNP Paribas, Calyon, ING, Intesa Sanpaolo, Natixis and Société Générale. Also, ICG underwrote a €100m-plus mezzanine facility.

“I’d describe the multiple as quite high,” said Cairo, the debt raised is approximately 5.7x the company’s Ebitda.

Cairo pointed to the company’s track record of very stable cash generation, particularly in previous downturns, which helped the buyers raise a debt package more akin to those seen before the credit crunch.

The fact that they also obtained commitments from lenders in August and that five of the lenders had prior relationships with N&W’s management team also helped.

“This deal was finalised in extremely challenging conditions. If it had been a slightly worse asset than this, completing the deal would probably not have been possible,” said Rondelli.

N&W Global Vending manufactures vending machines for distributing hot and cold drinks, snacks, and bottled and canned drinks. The largest such manufacturer in Europe, it also has offices in Argentina, Brazil and China and is seeing significant demand for its products in Central America, CEE, the Nordic region and India.

The €395m-turnover company had been owned by Argan and Merrill Lynch since November 2005. The sponsors completed the bolt-on acquisition of espresso technology specialist company SGL a year after the original buyout.

BPE brought in Investcorp as co-investor as the deal was too large for the firm, which usually targets transactions in the €10m to €200m range, to complete alone. The two developed a relationship earlier this year when Investcorp bought CEME Group from BPE. Fellow Italian company CEME is also a coffee-related business – it produces fluid control valves that are used in espresso machines.

“All the market research points to the continuation of the espresso revolution, which is seeing growing demand for espresso-based products in geographies across the world,” said Cairo.