TPG's attention has been firmly on Greencross' balance sheet, with the company levered at 2.8-times EBITDA at June 30 and no big uptick in cash flow expected. Rohan Thomson- by
Pets and vets retailer Greencross has been working towards having some big news for shareholders at the company's annual general meeting on Friday.
The question is just how big.
The company's board and bankers were in final stage talks with suitor TPG Capital on Thursday night, seeking to have a signed and firm takeover offer for the company.
Street Talk understands the parties were still a little apart on the exact number. While TPG boss Joel Thickins is renowned as a tough negotiator and the talks had ebbed and flowed in the past two days, sources in both camps were confident a deal could be struck and there would be an offer ready for shareholders as early as Friday.
Fund managers were tipping a deal with a "5" in front of it.
Greencross shares closed at $4.54 on Thursday, and were at $4.14 prior to Street Talk revealing TPG's renewed interest on October 10. By that stage, TPG were already in the data room on what both parties had designed to be an "exclusive" basis.
It is understood TPG has since finished due diligence and secured funding for the offer. The buyout firm has UBS and Credit Suisse were on board to handle the funding, sources said.
Macquarie Capital and boutique Allier Capital are advising Greencross. Law firms Clayton Utz (Greencross) and Gilbert + Tobin (TPG) are also involved.
A bid at $5.35 would be about a 30 per cent premium to the undisturbed share price and value Greencross' equity at about $645 million. Add debt and the deal size would jump to about $910 million, based on Greencross' $268 million net debt at June 30.
Should TPG secure its target, it would be expected to seek at least a 20 per cent return for its own investors on an internal rate of return basis. It would also be 2½ years since TPG last had a crack at Greencross. It offered $6.75 a share in conjunction with rival The Carlyle Group, only to be knocked back by Greencross' board in February 2016.
It comes as listed equities fund managers and analysts have been thinking about Greencross' future, in light of changes to the wider retailing market. Their attention has been firmly on Greencross' balance sheet, with the company levered at 2.8-times EBITDA at June 30 and no big uptick in cash flow expected. It means the board may have an equity raising in the back of its mind, as it talks to TPG and others about a takeover offer.
