Vestar Closes Unilever Deal With Mezz Financing

Target: Laundry business of Unilever

Price: $1.4 billion

Sponsor: Vestar Capital Partners

Seller: Unilever

Financial Adviser: Sponsor: JPMorgan, Lehman Brothers; Seller: Morgan Stanley & Co.

Legal Adviser: Sponsor: Kirkland & Ellis LLP ; Seller: Cravath, Swaine & Moore LLP

Vestar Capital Partners recently closed its $1.45 billion deal for the laundry business of Unilever in one of the largest buyouts of recent weeks.

Vestar Capital plans to merge the former Unilever brands—All, Wisk, Sunlight, Surf and Snuggle—with Huish Detergents Inc., which the firm has owned since April 2007. The combination will be called The Sun Products Corp. and led by Neil DeFeo, former CEO of Playtex Products Inc. Vestar Capital paid Uniliver $1.075 billion in cash and $375 million in preferred shares. Over one-third of the capitalization of the deal is equity.

The New York-based buyout shop closed the deal with the help of mezzanine financing from The Blackstone Group subsidiary GSO Capital Partners and TCW/Crescent Mezzanine Partners, according to Brian Ratzan, a managing director in charge of Vestar Capital’s diversified Industries group. GE Capital Markets Inc. provided a $175 million term loan. JPMorgan served as placement agent for the debt.

The financing for the deal—miniscule compared to the blockbuster deals of 2006 and early 2007—illustrates that it is still difficult for buyout shops to finance deals unless they are uniquely positioned to buy a company, as Vestar Capital was in this case, having owned Huish. “This deal could’ve been done two years ago in a high-yield offering,” Ratzan said. The financing required multiple meetings between the lenders, Vestar Capital and management, and “getting into the details in a way I don’t think lenders did a couple years ago.”

Nonetheless, two to three times as many mezz providers than were needed to finance the deal offered to support it, Ratzan said. “My sense of the market is you can get deals done in a tough market as long as they’re high-quality transactions,” he said. Also alleviating lenders concerns was that the deal is under 5x leveraged, Ratzan said.

Going forward, Vestar Capital is looking to invest in additional marketing and research and development for the brands, Ratzan said. The investment comes out of Vestar Capital Partners V LP, a $3.75 billion vehicle raised in 2005 that is now 70 percent invested.