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Fitch: CRH Deal Shows Trade Buyers Outbidding Financial Sponsors
2015年2月6日 / 下午3点08分 / 3 年前

Fitch: CRH Deal Shows Trade Buyers Outbidding Financial Sponsors

(The following statement was released by the rating agency) LONDON, February 06 (Fitch) CRH's EUR6.5bn acquisition of assets from Holcim and Lafarge shows trade buyers continue to outbid financial sponsors for large, high-quality assets in 2015, Fitch Ratings says. The deal demonstrates that trade buyers have greater pricing power in competitive auctions, as they have lower required returns than financial sponsors. They also frequently have lower borrowing costs and greater potential to extract cost saving synergies. Trade buyers are seeking acquisitions to reduce excess capacity in their industries and improve profitability through scale and synergies, in the absence of conditions that foster capex-driven revenue growth and margin expansion. Emerging-market trade buyers seeking brand enhancement and product expertise are also paying premium prices for European targets. With the additional appetite from equity markets for IPOs, competition for assets can be fierce. Trade buyers also beat financial sponsors in high-profile acquisitions including Chinese hotel group Jin Jiang's acquisition of Group de Louvre Hotels from Starwood, Lixil and Development Bank of Japan's acquisition of Grohe, and the sale of Ribena Lucozade to Japan's Suntory. Financial sponsors have been active sellers in the recent high-enterprise-value environment as they exit long-held pre-crisis transactions, often to trade buyers. They are under increasing pressure to re-invest sale proceeds and recent fundraisings into new transactions. Resistance to club transactions appears to be declining and European high-yield bond and leveraged loan markets have the risk appetite and funding capacity to support 2007-style jumbo transactions. But despite 7x leverage being available in some cases, knockout bids from trade buyers mean sponsors have to contribute substantial equity to compete, which dilutes returns. CRH expects a return on equity in the high-teen percentages in 2016, with EUR90m in annual synergies, whereas PE sponsors typically aim for returns over 20%. The high targeted returns are due to the demands of investors and the cost of payouts to management to secure their support. Sponsors may therefore have to seek opportunities for synergies by combining portfolio assets, or convince sellers they can manage near-term execution risks better than listed trade buyers, which have quarterly financial performance targets to maintain. Large trade acquisitions could also spark smaller opportunities for PE if the trade buyer wants to offload part of the acquired business. For example, KKR bought South Korea's Oriental Brewery from AB InBev following InBev's acquisition of Anheuser Busch. It then sold the business back to AB InBev last year. There is a comparative lack of sponsor-related deal flow, but recent deals show trade purchasers are embracing leveraged loans and high-yield bonds to finance acquisitions. Altice SA issued high-yield bonds to support its equity contribution to Altice International's acquisition of Portugal Telecom, where it outbid Apax. Similarly, Turkey's Yildiz established an SPV in November to acquire United Biscuits with a 50% equity contribution supporting an all-loan financing. These follow the comparatively high-equity contributions in Numericable/SFR, Liberty Global/Ziggo, and Benckiser/DE Master Blender financings. The rise in strategic corporate issuers will help diversify bond and loan portfolios away from highly levered single 'B' sponsor issues. But leveraged credit investors will not lose out entirely on higher-yielding sponsor supply, as sponsors will issue new debt to recapitalise legacy assets and finance dividend payouts. We maintained the Rating Watch Negative on CRH's 'BBB' IDR following the announcement. We also affirmed Holcim's 'BBB'/Stable rating and maintained the Rating Watch Positive on Lafarge's 'BB+' rating. Contact: Edward Eyerman Managing Director Leveraged Finance +44 20 3530 1359 Fitch Ratings Limited 30 North Colonnade London E14 5GN Paul-Antoine Conti Director Leveraged Finance +44 20 3530 1292 Anil Jhangiani Senior Director Corporates +44 20 3530 1571 Simon Kennedy Director Fitch Wire +44 20 3530 1387 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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