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Bids on Cadbury’s Beverages Americas business are likely to come in closer to USD 14bn, rather than USD 13bn, said a source familiar with the situation. This is despite a cut in the staple financing package being offered to LBO firms to fund the deal.
A second source, also knowledgeable about the situation, said the staple package had been cut to 8.25x EBITDA from the 9.25x being offered earlier in the process, but the first source said the decline in the staple multiple isn’t quite as large. The first source didn’t provide numbers on where the staple multiple stands at the moment.
The second source said, given the decline in the loan being offered on the business, the price was more likely to come in within the USD 13bn to USD 14bn range, than USD 14bn to USD 15bn.
When asked if USD 13bn to USD 14bn is an accurate range, the first source said bids were likely to be closer to USD 14bn than USD 13bn. One reason why the price was likely to come in closer to USD 14bn was that the EBITDA number being used by financing banks was slightly higher than the number being used earlier in the process, the first source added, without disclosing either EBITDA figure.
Cadbury has reported 2006 EBITDA for Beverages Americas as USD 1.3bn. Using that EBITDA and a financing multiple of 8.25, and assuming that private equity bidders put in 20% equity, the purchase price comes to USD 13.4bn, but at a multiple of 9.25 times, it would reach USD 15.03bn. It was unclear how much equity the private equity bidders were contemplating putting into the deal.
Morgan Stanley is providing staple financing on the deal. The auction is at a late stage, with final bids expected to be due by the end of July, said sources.
Two private equity consortia are in the process, one made up of the Blackstone Group, Kohlberg Kravis Roberts & Co. and Lion Capital, and the second Bain Capital, Thomas H. Lee Partners and Texas Pacific Group.
Officials at the private equity firms, and a spokesperson for Cadbury, declined to comment. Morgan Stanley and Goldman officials didn’t return calls.
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