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Banks Plan €6 Billion Debt Financing for Sanofi Consumer Sale

The Sanofi headquarters in Paris. (Nathan Laine/Bloomberg)

(Bloomberg) -- Banks including Goldman Sachs Group Inc. and Morgan Stanley are lining up more than €6 billion ($6.5 billion) of debt financing for would—be buyers of Sanofi’s consumer health division, according to people familiar with the matter. 

The staple financing — pre-arranged funding offered to potential bidders for an acquisition — underscores banks’ appetite to finance leveraged buyouts. 

Goldman and Morgan Stanley are advising Sanofi on the sale of the $20 billion business. The other advisers, Bank of America Corp. and BNP Paribas SA, also are involved in the financing, said the people, asking not to be identified as the matter is confidential. 

Any financing for the deal is also expected to include a payment-in-kind loan that could be worth at least €1.5 billion, Bloomberg News reported last month. The PIK arrangement - one of the most borrower-friendly concessions lenders can make - would reduce the upfront interest burden for the company, but it increases the size of the overall debt. 

Banks don’t tend to underwrite payment-in-kind debt as it is too risky to hold on their balance sheets. Instead, the buyer often opts to go to direct lenders for PIK financing.

Goldman, Morgan Stanley, Bank of America and BNP declined to comment. Sanofi declined to comment on the financing, a spokesperson said, adding that the company is keeping all options open to maximize the value of the consumer unit.

Sanofi said in October that it aimed to split off the business, either by listing it on the stock market or selling it. A sale of the unit, which sells over-the-counter products including Phytoxil cough syrups and Icy Hot pain relief gels, could rank among one of the biggest deals in Europe this year. 

First-round bids are due next week, the people said. However, the inconclusive outcome of the French legislative election has made some bidders nervous about committing such a large equity check to a single deal. 

Traditional lenders are very much back in the market for funding risky transactions. With investors betting that interest rates have peaked, banks are more confident that they can underwrite big acquisitions and then sell the debt on via broadly syndicated loans. Buyout firms, as a result, are increasingly leaning toward banks to finance their deals because the loans are cheaper than those from private credit.

If banks win the lending business for the Sanofi unit, bidders would likely look at financing in both dollars and euros, tapping both the high-yield bond and syndicated loan markets, the people said.

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