The two rival private equity consortia bidding for Spanish retailer Cortefiel have confirmed previous speculation that they would merge by agreeing to split the equity equally. The new deal sees CVC withdraw its last offer of €17.90 per share and all three pay €18.40 per share (€1.44bn, US$1.75bn) for equal stakes in the company. CVC was advised by 360, a local boutique, while JP Morgan and Citigroup are advising PAI and Permira, with Goldman Sachs carrying out the auction.
SG, which had been arranging the debt package for CVC, has agreed to finance the new bid as joint mandated lead arranger with two or three of PAI and Permira’s backers, Royal Bank of Scotland, ING and JP Morgan. SG will take a third of the underwriting, with the other two or three banks splitting the remainder.
The agreed deal follows an interesting auction process and widespread speculation that a merged consortium would be formed. Last month, CVC had seen its offer for Cortefiel, which was agreed in May, trumped by Permira and PAI Partners’ €18.40 per share offer in the first round. One senior banker close to the deal said this would have been “the worst case for CVC but theoretically any deal would have been better then none”.
The PAI/Permira bid was below the €19.30 per share price required in order to break an agreement between Cortefiel’s controlling shareholder and CVC.
This led to a stalemate and the expectation that a joint deal was being prepared, which had to be agreed by July 23 according to regulatory restrictions.
Gonzalo Hinojosa, managing director of Cortefiel, owns 55.74% of the fashion retailer with his family and had agreed to sell the stake to CVC unless a rival offer came in at 8% more than the UK buyout firm’s bid.
Any deal with one party was conditional on the bidder receiving support from 75% of Cortefiel’s shareholders, however. Remaining shareholders, such as Hidasa, are understood to have avoided the same offer clause. Hinjosa had earlier ruled out selling to a trade buyer, a decision that limited Goldman’s ability to draw out rivals, as has happened in the Merrill Lynch-run auction of Auna, the Spanish telecoms firm.
Deal sources said that the price reached was already “challenging” and that there were few potential trade buyers. The only likely trader suitor was Inditex, although a deal there was unlikely, sources said.