TPG Capital Mulling Bid for Pacific Brands

Buyout shop TPG Capital is mulling a bid for Australian underwear maker Pacific Brands, Reuters reported Thursday. TPG has not tabled a bid for the asset, the source said, but is instead watching developments on the rival bid made by KKR & Co. in January, Reuters wrote.

(Reuters) – Private equity firm TPG Capital has held initial discussions with a group of eight banks to fund a takeover bid for Australian underwear maker Pacific Brands, according to a source familiar with the matter.

TPG has not tabled a bid for the asset, the source said, but is instead watching developments on the rival bid made by KKR & Co in January.

At the time of KKR’s bid, Pacific Brands said there was no certainty that discussions would lead to any agreement.

A second source said the banks that TPG has approached are all existing lenders to Pacific Brands.

Pacific Brands Holdings in 2011 got a A$500 million ($537 million) loan from National Australia Bank, Westpac Banking Corp, ANZ, Commonwealth Bank of Australia and HSBC, according to Thomson Reuters LPC.

A spokeswoman for TPG declined to comment, while a spokeswoman for Pacific Brands said she had no comment on the TPG speculation.

The size of any loan has yet to be finalised, the second source said, adding that discussions are at a very early stage.

Three loans bankers familiar with the company said the protracted slump in Australia’s retail sector meant the amount of debt that could be used on a buyout would be limited.

Two of these sources suggested a maximum buyout loan could be around A$450 million, or three times the company’s earnings before interest tax, depreciation and amortisation (EBITDA).

Because Pacific Brands has seasonal expenditure related to garment production, one loans banker said it needs an additional working capital facility of over A$200 million.
(By Narayanan Somasundaram and Stephen Aldred)