PE Firms Bid for Kabel Deutschland

LONDON/FRANKFURT (Reuters) – A trio of private equity firms, Advent, BC Partners and Carlyle, are set to submit bids for German cable provider Kabel Deutschland, four people familiar with the matter said.

Buyouts are finding favour while market volatility undermines plans for public share sales.

The business could sell for up to 5 billion euros ($6.8 billion), bankers said, in what could be the largest leveraged buyout in more than two years as private equity firms look to put cash to work. Banks will offer up to four billion euros of leverage in support of a deal, one of the sources said.

“(Bidders) need 30 percent equity … an IPO is highly unlikely now thanks to the good offers,” one of the people said.

Kabel Deutschland is also weighing plans to raise at least 1 billion euros in an initial public offering as early as the second quarter. [D:nLDE60K1HV]

CVC is still “highly focused” on Kabel Deutschland, another person said, and it was possible some of the firms could make joint offers because of the amount of equity needed.

BC Partners will bid without Apollo, however. The two firms last year sold Unity Media, Germany’s No.2 cable operator to U.S. cable company Liberty Global (LBTYA.O) for 3.65 billion euros.

Apax APAX.UL, which approached Kabel Deutschland’s owners seeking exclusive negotiations before the start of the process, has not placed an offer, two other people said. The firm regarded the business as too expensive, one of the people said.

Kabel Deutschland is 88 percent owned by Providence Equity Partners, 8 percent by Teachers’ pension Plan and 4 percent by management.

Morgan Stanley, Deutsche, UBS, JP Morgan, BNP Paribas and Societe Generale are providing staple financing for the deal, indicating the bids are fully financed, two bankers said.

The banks have put together a package of financing options that include a bridge loan to a high-yield bond, another banker said.

The inclusion of the high-yield bond facilitates a lower equity cheque than the standard 40-50 percent that has characterised post-crisis deals, several sources said.

(Reporting by Victoria Howley, Tessa Walsh and Zaida Espana in London and Philipp Halstrick and Alexander Huebner in Frankfurt; Editing by Dan Lalor) ($1 = 0.7320 euro)