JP Morgan is working on a staple financing of up to $850 million to back a potential buyout of Astra Tech, the dental implants and healthcare unit of AstraZeneca, banking sources said on Wednesday.
The staple financing, a pre-arranged financing package which is offered to potential bidders, includes senior and mezzanine loans, a banker close to the deal said.AstraZeneca (AZN.L) said in November that it had started a strategic review for Sweden-based Astra Tech, which included auctioning the business that is considered non-core for the UK-based pharma company.
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The company is expected to fetch $2 billion and the debt package could total $650-850 million, depending on the amount of debt used to buy the company, bankers said.
"JP Morgan will support the strategic review process and help us evaluate our options for value creation and value maximisation," an AstraZeneca spokesman said.First-round bids for Astra Tech are due this week and have attracted interest from trade bidders and private equity firms and other banks are working on alternative financings, the bankers said.
The sale could see leverage ratios of up to 6.5 times debt Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) in a buyout if both of Astra Tech's businesses -- dental implants and healthcare -- are sold jointly, sources said.
Leverage ratios in Europe on leveraged buyouts in the fourth quarter of last year averaged 4.08 times, according to Thomson Reuters LPC data. (Reporting by Isabell Witt, additional reporting by Tessa Walsh; Editing by Jon Loades-Carter)