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December 9, 2009 5:53 pm
EQT, the private equity arm of Sweden’s Wallenberg family, is on Thursday expected to announce the €2.3bn takeover of Springer Science and Business Media.
The deal ends a tortuous sales process by Cinven and Candover, its two UK-based private equity owners, which will receive only about €100m for their equity in the German publishing group.
It is the latest sign that Europe’s private equity industry is slowly recovering from the credit crisis, which has triggered an almost total freeze on deals for more than a year.
Springer has been struggling under about €2.2bn of net debt and the deal hinges on its banks agreeing to refinance the company, which they have only been prepared to do since credit markets rebounded in recent months.
Banks, led by Goldman Sachs, Deutsche Bank, Barclays Capital and Unicredit, are expected to meet on Thursday to discuss a refinancing deal, where EQT would invest about €450m of fresh capital to repay debt at Springer.
The deal – expected to close early in February – would be financed with a new €1.6bn debt package provided by the existing lenders to the world’s second-largest publisher of scientific and medical books.
It is expected to value Springer at about eight times earnings before interest, tax, depreciation and amortisation, similar to the public market valuations of UK rivals Informa and Reed Elsevier, according to a person familiar with the deal.
Lenders are expected to agree to the deal, as it repays some of their debt at par and allows them to avoid taking a provision on their loans to Springer, which had been expected to breach covenants next year.
Both Cinven and Candover have already returned about 1.6 times their combined €600m equity investment in the company, after taking on more debt in three refinancings to pay themselves big dividends.
Cinven and Candover would have faced big hurdles to putting more money into the company themselves, as Springer was bought by their older funds that have little capacity left for new investments.
Candover, in particular, would have struggled to finance a fresh injection of equity, as its investors recently agreed to terminate the investment period on its new €3bn buy-out fund, leaving it without a pool of capital to invest in new deals.
Ultimately, analysts think the likely long-term future of Springer would be a merger with Informa, that last week said it had walked away from considering a potential takeover of its German rival under pressure from its investors.
Springer was created in 2003 by Cinven and Candover through a merger of BertelsmannSpringer and KAP, a Dutch publishing group formerly owned by Wolters Kluwer.
Cinven and Candover were advised by Goldman Sachs and UBS, while EQT was advised by Deutsche Bank and Barclays.
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