VetPartners’ incumbent lender Ares is expected to offer GBP 2bn of debt financing through a staple that will be made available to private equity suitors eyeing a takeover of the UK-based veterinary chain, two sources familiar with the situation said. Still, rival direct lenders remain unfazed and are positioning to compete for a role in financing what is slated to be a GBP 3bn leveraged buyout, both sources added.
JPMorgan and Jefferies – sellside advisors to VetPartners’ owner BC Partners – are expected to circulate information memoranda (IMs) to prospective bidders imminently, according to a third and a fourth source familiar. The investment banks had planned to distribute IMs earlier this month, but the implosion of Credit Suisse delayed the launch of a competitive auction, the third source added.
While Ares was last month reported to have been leading the pack to finance an acquisition of VetPartners, rival private credit providers are preparing to offer potentially more competitive terms and pricing in an effort to better the incumbent’s staple offering, the first two sources said.
Although Ares – a private credit titan whose European direct lending arm alone has more than USD 50bn of assets under management – is well-positioned for a sole financing role, the asset manager has historically not offered covenant-lite terms, the first source pointed out. Given that VetPartners is a GBP 150m–GBP 200m EBITDA business carrying a GBP 3bn price tag, a club of outside direct lenders could look to underwrite a cov-lite debt package more compelling to private equity bidders, this source continued.
In addition, a club of private credit funds with diversified allocations could offer more competitive pricing than Ares, whose staple offering is expected to carry a high margin in return for its expedience, the first three sources suggested.
Blackstone, KKR and Partners Group are among sponsors preparing non-binding offers for VetPartners, as previously reported. Cinven, PAI Partners and TPG had also expressed preliminary interest in the asset, as previously reported.
BC Partners, which bought the asset for GBP 700m in 2018 from August Equity, has been preparing an exit from the business since September last year, as reported. The sponsor part-funded the 2018 buyout with a GBP 420m debt package, comprising a unitranche, super-senior facilities and a PIK facility, all provided by Ares, as reported. The deal was levered at around 6.5x, going up to 8.5x when factoring in the PIK, as previously reported.
Ares also extended a GBP 175m acquisition line, which BC Partners used to finance at least 14 bolt-on acquisitions across Europe, as reported.
BC Partners acquired VetPartners via the 2016-vintage BC European Capital X.
VetPartners operates around 160 veterinary practices in the UK, with around 7,500 employees working in 500 sites across the UK and from its headquarters in York. In 2019, the firm expanded into continental Europe following the acquisition of practices in Italy, and now also operates in France, Spain, Portugal, Germany and Ireland.
Ares, BC Partners, JPMorgan and Jefferies declined to comment.