FRANKFURT (Reuters) – The owners of cable provider Kabel Deutschland have asked for indicative bids for the German company by next Monday in what may turn out to be the biggest leveraged buyout in more than two years, sources familiar with the matter said.
“They want to get a feeling for the offers and root out any offers deemed too low,” one of the people with knowledge of the matter said, adding that a dual track strategy was complex enough there was no need to make it more time consuming by having too many bidders.
“At that stage it will not be down to one bidder, it will be a few – probably less than five, its not a huge process,” a media specialist banker said.
Kabel Deutschland (KDG) is also sounding out options for an initial public offering (IPO).
A person familiar with one of the bidder’s thinking said a leverage of 5.5 times 2010 EBITDA, which is estimated at 660 million euros ($918.2 million), was expected. That would result in a leverage of 3.5 to 3.7 billion euros.
“A price tag of 5 billion euros would be ambitious”, the person said.
But the banker specialising in media, said “the 5 billion euro out there in the press is definitely within shouting range and maybe more.”
According to three people with knowledge of the situation private equity firms CVC, Advent, Carlyle and BC Partners [BCPRT.UL] are very likely to submit bids while Apax Partners [APAX.UL], which owned Kabel Deutschland from 2003 to 2005, was still wavering.
BC and Apollo last year sold Unity Media, Germany’s No. 2 cable operator, to U.S. cable company Liberty (LBTYA.O) for 3.65 billion euros.
Two sources said a staple financing was already in place with some four banks — Morgan Stanley, Deutsche Bank, UBS and JP Morgan — doing the IPO. More banks may be added.
The staple currently includes a bridge loan to a high-yield bond issue although all options are available, the people said.
“The staple is a loan-bond combination, it’s a bridge to a bond takeout. There is no other way to raise this much money otherwise,” a senior leverage banker said.
Kabel Deutschland is 88 percent owned by private equity firm Providence Equity Partners, 8 percent by Teachers’ Pension Plan and 4 percent by management.
KDG successfully completed a loan amendment on January 22 that extended the maturity of some of its debt and gave it greater flexibility before its planned sale or IPO.
It extended the maturity of up to 1.3 billion euros of existing debt until March 2014 and secured greater flexibility to make potential acquisitions or raise new money to refinance existing debt.
The loan amendment and extention was led by global co-ordinator and bookrunner Goldman Sachs, with bookrunners BNP Paribas, Deutsche Bank, JP Morgan and Royal Bank of Scotland.
KDG revenues grew by 10 percent to 735.5 million euros for the six months ended Sept. 30.
(Reporting by Alexander Huebner, Philipp Halstrick and Nicola Leske in Frankfurt and Tessa Walsh in London)