Investment banks and direct-lending funds are competing to provide as much as €4 billion ($4.2 billion) of debt to finance a potential take-private of European classifieds company Adevinta ASA, people with knowledge of the situation said.
Adevinta last week said that it received a non-binding takeover proposal from a private equity consortium that includes Blackstone Inc. and Permira, confirming an earlier Bloomberg report revealing plans for what would be one of the year’s biggest buyouts.
Spokespeople for Blackstone and Permira declined to comment. A representative for Oslo-based Adevinta didn’t respond to requests seeking comment.
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The $1.5 trillion private credit market has become an increasingly popular source of buyout financing over the past year-and-a-half after billions of dollars in losses on mistimed loans forced banks to scale back lending. Were the Adevinta deal to go the direct-lending route, it would be one of Europe’s largest ever, rivaling the £3.5 billion provided to Access Group last year, according to data compiled by Bloomberg.
More recently, however, bank risk appetite is returning as institutional investors look to put money to work once again. The increase in demand has come amid optimism over a potential soft-landing for the US economy, and a pause in the rate-hike campaigns of the Federal Reserve and the Bank of England.
The success of recent bellwether transactions — such as the jumbo financing backing the buyout of Worldpay Inc., are likely to give bankers confidence that investor appetite for broadly syndicated financings has returned.
Banks have been reducing the pricing protection they demand when committing to new deals — also known as flex — with levels now returning toward historical norms of around 125 basis points, rather than over 200 basis points, according to previous Bloomberg News reporting. That means competition with private credit lenders for deals will likely heat up.
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The prospective financing for Adevinta is the latest example of buyout firms running a so-called dual-tracking process, where they seek competing bids from banks and direct lenders. Other recent examples in Europe include buyout processes of Constantia Flexibles and Pharmanovia.
Goldman Sachs Group Inc. is advising Blackstone and Permira, while JPMorgan Chase & Co. and Citigroup Inc. are advising Adevinta, some of the people familiar with matter said.
Spokespeople for Goldman Sachs and JPMorgan declined to comment, while Citigroup didn’t respond to a request seeking comment.
--With assistance from Katharine Hidalgo and Davide Scigliuzzo.
(Adds additional context on bank appetite in paragraph seven, and recent examples of dual-tracking.)
Author: Silas Brown, Claire Ruckin and Eleanor Duncan
