By Tessa Walsh
LONDON (LPC) - Banks working on a jumbo debt financing of more than US$10 billion to back the potential sale of Johnson Controls International Plc’s (N:JCI) power solutions business expect two bidders to be shortlisted imminently, banking sources said on Friday.
The potential sale of the unit, which makes advanced batteries for vehicles, could fetch around US$12bn in what is expected to be one of the biggest buyouts of the year.
"We heard that the board will decide this week who to take forward to a two horse race and get it (the sale) done quickly. There's a bunch of sponsors all over it," a senior loan banker said.
Second round bids were due to be submitted on September 7, he added. Potential buyers met the company’s management in late July.
“I don’t know the timing to close but it's definitely going to happen,” the senior banker said.
The potential sale is attracting strong interest from top private equity firms. Apollo Global Management, Brookfield Asset Management and Onex Corp have been shortlisted, two bankers previously said. Clayton, Dubilier & Rice (CD&R) has also been named as a bidder.
"Apollo is confident, CD&R is also looking and Onex," the senior banker said.
Johnson Controls International was not immediately available to comment.
DEBT FINANCING
Banks are working on financings backing potential bidders but are waiting to hear which of the bidders have been shortlisted before submitting firm underwritten financing offers.
The company’s Ebitda is US$1.75bn, which could give a financing of US$10.5bn, based on leverage of six times, although the leverage and debt financing could be higher.
"It's more than US$10bn with the revolver. It's big," the senior loan banker said. "As soon as we know who’s going forward, there will be a mad scramble – it's huge and all the banks will be all over it," he added.
The debt financing will consist of leveraged loans and high-yield bonds and will be denominated in dollars and euros. The transaction is expected to reach the market in the fourth quarter, several bankers said.
The power solutions business produces and distributes about 154 million lead-acid batteries for cars and trucks.
"We’re really keen on it, we love the business it’s a market leader with a high margin and every car needs their batteries for safety and control," the senior banker said.
MARKETS STRONG
The deal will also follow several jumbo financings that have launched in recent weeks, including a US$13.5bn loan and bond financing backing Blackstone’s buyout of Thomson Reuters’ (TO:TRI) F&R unit, which owns LPC and IFR, and a US$7.4bn loan and bond financing backing Akzo Nobel's (AS:AKZO) of its speciality chemicals business.
After a strong response to both deals in the US, bankers think that the markets have the capacity and appetite to support another deal of this size.