Permira lined up refinancing with Credit Suisse and Deutsche Bank after snubbing a joint offer for the company from Blackstone and BC Partners - the last remaining bidders in a sales process last month - and ending what would have been one of the largest leveraged buyouts of the year. Permira bought Iglo group from Unilever for 1.7 billion euros in 2006.
The business, which includes Birds Eye fish fingers and frozen peas, generated sales in excess of 1.1 billion euros last year and has been under the ownership of Permira for six years. Permira has paid down much of Iglo's debt, leaving it with net debt of 1.4 billion euros, or about four times last year's earnings before interest, tax, depreciation and amortisation. But the International Financial Review quoted unnamed investors as saying the refinancing is a bad idea, and that Permira should have worked to build up Iglo until it was worth the £2.8 billion it sought -- Blackstone and BC refused to go above £2.5 billion.
The recapitalization will increase Birds Eye's debt from 4.2 times ebitda to 5.5 times, almost 2 billion euros. While much of the cash will be used to fund dividends to Permira, to ensure that its investors realise some near-term reward from the asset after an abortive sale process, the remainder is expected to fund expansion, both organic and acquisitive.
That could entail a bid for some of the assets of Findus Group, a rival foodmaker owned by the private equity group Lion Capital, which is looking to break up the struggling company to avoid breaching the terms of the covenants on its £700 million of gross debt. Iglo bought the Italian operations of Findus two years ago in a deal worth more than 800 milliion euros That purchase was financed with about 500 million euros of debt; Permira provided about 300 million euros of equity.
