LONDON (Reuters) – French care homes group Medica will seek to raise at least 250 million euros ($372.7 million) in an initial public offering (IPO), the bulk of which will pay down debt and fund expansion, an investor in the business said.
Some 90 percent of the IPO proceeds will go to reducing Medica’s debt and funding the firm’s expansion strategy, Dominique Gaillard, member of the executive board of AXA Private Equity (AXAF.PA) — a co-investor in Medica alongside buyout house BC Partners — told Reuters.
The remaining 10 percent — a minimum of 25 million euros — will be returns to the two groups and company management who bought into the business in 2006, Gaillard said.
Medica is likely to float early in 2010, people familiar with the matter said.
As stock markets across Europe have stabilised, large buyout firms have been preparing their best performing companies for flotation. But bankers are telling them public investors have a low tolerance for debt, so proceeds will have to reduce gearing before private equity firms can bank profits.
The minimum amount being touted for listing in Paris represents around one third of Medica’s value, but Gaillard said public markets could be ready to accept a larger chunks of privately-owned businesses being listed.
“I think we might see IPOs where the market can accept that as much as 40 or 50 percent of the total value of the stock is made available for buyers right from day one, either through primary or secondary issuances,” said Gaillard.
Medica recently received waivers from lenders to deleverage the company and start paying dividends, and for BC Partners to drop its stake below 50 percent, as it prepares for a first quarter launch, people familiar with the process said.
Credit Suisse (CSGN.VX), BNP Paribas (BNPP.PA) and Royal Bank of Scotland (RBS.L) are advising on the IPO. All three banks declined to comment.
A Paris stock-market listing would rank Medica alongside listed competitors such as Orpea SA (ORP.PA) and Korian SA (KORI.PA).
BC Partners has two other portfolio companies earmarked for listing next year — chemicals distributor Brenntag and travel industry technology provider Amadeus.
German cable operator Unitymedia [UNTMDA.UL], which it majority-owned alongside Apollo [APOLO.UL], was on track to be the first European private equity IPO until Liberty Global (LBTYA.O) snapped up the business the day it was formally to launch the listing process.
Bankers said float proceeds from the Medica transaction would pay off some 185 million euros in mezzanine and term loans, helping reduce the firm’s leverage ratio to around 4 to 4.5 times debt to earnings before interest, tax, depreciation and amortisation (EBITDA) from 7.3 times, Reuters LPC reported last week.
BC led the acquisition of the business from rival private equity firm Bridgepoint in 2006 for about 750 million euros.
(additional reporting by Daisy Ku and Quentin Webb; editing by Steve Slater, John Stonestreet)