The recently announced $4.2 billion leveraged buyout of Ondeo Nalco is set to stream $3.2 billion of financing into the debt markets and Bank of America, J.P. Morgan, UBS, Goldman Sachs and Citigroup are among the firms vying to lead the deal, according to market players. Hungry investors sitting on cash are looking forward to a new money bank deal that should come in north of $1 billion, bankers added.
Nalco, a water treatment provider and chemical processor currently owned by French water company Suez, is being acquired by The Blackstone Group, Apollo Management and Goldman Sachs Capital Partners. A banker familiar with the situation said Blackstone, which is running the show, was still kicking around financing structures last week. He added that banks have yet to officially commit to the deal. UBS and Rohatyn Associates advised Suez on the transaction, while Blackstone was supported by Citi and B of A. J.P. Morgan and Goldman advised Apollo and Goldman's Capital Partners division on the deal.
Spokesmen for Blackstone and Apollo said details regarding the debt package's structure and lead arrangers are still being finalized and declined to comment further. But the banker said the $3.2 billion senior and subordinated deal could most likely round out to $1.6 billion in bank debt and $1.6 billion in bonds. "I'm guessing it's going to be pretty aggressively levered," he noted, expecting multiples to near six times. Officials from B of A and UBS declined to comment, while bankers from Goldman and Citi did not return calls. A J.P. Morgan spokesman declined to comment.
"The only question is if the leverage is really going to spook the guys," the banker said. The financing should hit the debt markets by mid-November, he noted. If market dynamics are the same by November, where investors are still short on supply, the deal should be well received, he said. The buyout is targeted for completion by the end of the year. The remainder of the purchase price for Nalco will be funded with equity from the investor group. Market players said Blackstone had originally been competing against Apollo and Goldman to win the bid for the buyout, but Apollo and Goldman came into the deal after Blackstone initially won the bid.
Nalco, along with its major competitor BetzDearborn--now called GE Betz after being acquired by GE Specialty Materials in 2002--are by far the leaders in their market, said John Rogers, v.p. and senior credit officer at Moody's Investors Service who covers chemical companies. "It's a very fragmented industry," he said of the water treatment business, explaining that Nalco focuses on water treatment servicing, as opposed to many other companies in the sector that are more focused on making the water treatment chemicals." [Nalco] provides the service where they will actually go out and monitor [water treatment]," he said. "There's not a whole lot of volatility," the banker said of Nalco's business.