(Bloomberg) -- KKR & Co., the Canada Pension Plan Investment Board and German billionaire Mathias Döpfner are looking to raise a total of around €4 billion ($4.2 billion) of debt to finance their bid to separate media conglomerate Axel Springer’s classified ads businesses from its news operations.
Döpfner, the publishing giant’s CEO, and the two investment firms plan on tapping the leveraged loan market and private credit funds to borrow the money, according to people familiar with the matter, who asked not to be named because the issue is private.
The debt package seeks to capitalize on lenders’ renewed appetite for leveraged buyouts — one of the most lucrative areas in finance. Wall Street’s fee-making LBO machine is starting to crank up again, following a few lean years, as interest rates start to cool and credit investors look to put money to work in new deals.
The Axel Springer financing follows hefty debt offerings for the potential take-private of Spanish pharmaceutical producer Grifols SA and the stake purchase in French drugmaker Sanofi.
Spokespeople for KKR and CPPIB declined to comment. A representative for Axel Springer didn’t immediately respond to a request for comment.
One part of the deal is already in the market, with a €1.95 billion ($2.1 billion) leveraged loan launched on Nov. 19 to part fund the spin-out of jobs platform The Stepstone Group. Investors have until Dec. 4 to commit to the euro- and dollar-denominated term loan B that will refinance existing Axel Springer debt and put cash on its balance sheet.
The next part of the plan will follow in the new year, with a further €1 billion debt offering for real estate ads unit Aviv Group, the people said. This will most likely come in the form of a standalone TLB, provided by banks and sold down to institutional investors via a syndication process, in much the same way as the Stepstone deal, the people added.
Private credit firms are already in the process of lining up a €725 million payment-in-kind financing raised at the holding company level, the people said. Direct lenders are also expected to supply a further €200 million to €300 million to facilitate the split, they added.
The deal to split up Axel Springer values the whole company at €13.5 billion, including more than €10 billion for the classifieds business, Bloomberg previously reported.
The group’s media assets, including Politico and Business Insider, will remain within Axel Springer, while four classified ad websites, including Stepstone and Aviv, will be spun off as separate joint ventures in which KKR and CPPIB will be majority shareholders.
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