Credit markets help Imperial beat CVC to Altadis

Trade buyer Imperial Tobacco has had its €16.2 billion offer for Altadis, the maker of Gauloises and Gitanes cigarettes, accepted by the company’s board, as rival bidder CVC Capital Partners was forced to revalue its bid in light of problems in the credit markets.

Trade buyer Imperial Tobacco has had a €16.2 billion ($22 billion) offer accepted for Altadis, although European buyout firm CVC Capital Partners is not yet ruling out a counter-bid for the cigarette-maker.

The €50 per share offer represents a multiple of 14.2 times Altadis’ earnings and a premium of 32 percent over Altadis’ closing price on 12 March when bid speculation about the Franco-Spanish cigarette company began. Altadis’ board has accepted the offer.

A banker close to CVC said no counter-bid was imminent, but that the firm may decide to make another offer later this year. Recent problems in the credit markets have forced CVC to reconsider the value of the deal, since it would now have to take on leverage at a higher cost than previously calculated, she said.

The buyout firm’s bid was also shaken by the departure of PAI Partners from its consortium in May. This was shortly after Altadis opened its books to the buyout firms, which had proposed a preliminary offer at the same price as Imperial’s current bid. At the time Altadis only granted Imperial limited access to its books, based on its opening €47 per share offer.

Buyout firms have been experiencing problems in the credit markets recently. The KKR-led consortium pursuing a €1.1 billion refinancing of Maxeda decided to shelve its plans, after previously attempting to sweeten its terms. 

Bankers say the troubles in the debt markets have caused the price of debt to rise and may bring an end to covenant-lite agreements, which allow borrowers to face less scrutiny from lenders.