Deals of the Year Awards 2018: Loans above £750m winner

The financing behind its sixth acquisition gave Melrose Industries the edge in this category

Winner – Loans above £750m: Melrose Industries

DOTY18 Melrose

The award for Loans above £750m was given to buyout group Melrose Industries for the £4.5bn facility put in place to finance its £8.1bn hostile takeover of GKN.

Drawing on its tried-and-tested ‘Buy, Improve, Sell’ strategy, Melrose purchases manufacturing businesses that have strong fundamentals, but which also demonstrate room for improvement where their performance is concerned.

Melrose then matures its acquisitions through a variety of strategies, from changing management focus to driving operational improvements, and sells them in order to return the proceeds to shareholders.

With its sights set on leading automotive and aerospace parts supplier GKN, Melrose was seeking funding for the proposed acquisition – the most high-profile M&A deal in the industrial sector in the UK market for some time, and the largest unsolicited takeover since Kraft’s bid for Cadbury.

 The judges noted the challenges inherent in acquiring such a large target, and were impressed by the speed and professionalism of this transaction 

Given the scale of the transaction, Melrose was looking for an exceptionally quick commitment turnaround. The company therefore obtained agreement from Lloyds and Royal Bank of Canada to underwrite the £4.5bn financing that would be needed to support the acquisition.

The deal was structured as a four-tranche multi-currency facility, including a multi-currency five-year revolving credit facility (RCF) as well as a three-and-a-half-year term loan across three currencies (GBP, EUR and USD).

The resulting finance was to be used for a combination of financing the acquisition of GKN, refinancing Melrose’s existing facilities and general working capital support.

The syndication took the form of a stage process, which led to a group of 27 banks entering the transaction in May 2018.

By securing ‘certain funds’, Melrose was able to support both the offer approach and the subsequent increases in offer prices, resulting in a smooth syndication process once the necessary shareholder approval percentage had been achieved.

The judges noted the challenges inherent in acquiring such a large target, and were impressed by the speed and professionalism of this transaction, which resulted in the acquisition of GKN.

As well as elevating the company into the FTSE 100, the purchase added significant scale to the existing business.

What the judges said

“In light of the hostile takeover, this was a major transaction that was completed in difficult circumstances and in impressive time. A well-crafted deal.”

Deal highlights

Provider Lloyds Bank, Royal Bank of Canada

Structure Multi-currency RCF; 3.5-year term loan in GBP, EUR and USD

Highly commended: Informa

In this category, the judges highly commended Informa’s complex acquisition financing deal, which comprised bridge and backstop facilities amounting to approximately £2.5bn.

The deal, which was intended to support the company’s transformational acquisition of UBM, included a £700m acquisition bridge facility, an £855m backstop facility for Informa’s RCF, and a £400m and $720m backstop facility for the RCF, US private placement and bond at UBM.

At the same time, the treasury team completed a Rating Evaluation Service/Rating Assessment Service process.

This ensured that the financing was appropriately structured to maintain Informa’s credit profile and its investment-grade credit ratings of BBB/Baa3 from S&P and Moody’s respectively.

The judges praised the short time frame of this well-executed deal: the fully executed and underwritten facilities were delivered in a matter of weeks, with the treasury engaging a single bank for the initial underwrite to preserve confidentiality and ensure a quick process.

What made this multifaceted transaction all the more impressive was that the deal was then syndicated to four other banks in only two weeks.

About The Treasurer's Deals of the Year Awards

The Treasurer’s Deals of the Year Awards recognise the outstanding work of treasurers, both within the treasury community and the wider business world. Through them we champion the success and achievements of treasury teams that have stood out in the market over the prior 12 months. Winning an award is a great way to strengthen your organisation's and your treasury's profile, bringing peer and industry acknowledgement.

This article was taken from the Deals Edition 2019 issue of The Treasurer magazine. For more great insights, log in to view the full issue or sign up for eAffiliate membership

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