(Bloomberg) -- Banks are losing out on about €220 million ($232 million) in underwriting fees after Brookfield Asset Management said it was abandoning its bid to take drug-maker Grifols private.
Around a dozen lenders, including some of the biggest names on Wall Street, have been working for almost six months to put together a leveraged loan and bond financing of roughly €11 billion, according to people familiar with the matter.
The banks were waiting for an official mandate, but following the collapse of the deal, they won’t get appointed and they won’t get their underwriting fees. These were set to be about 2% of the debt package, in line with industry standards, the people added.
Brookfield Asset Management announced on Wednesday that it was walking away from the deal due to disagreements over valuation. The Grifols family, which owns about a third of the company, had earlier said it wouldn’t support a new third-party bid. The debt package for the take-private would have been the largest in Europe’s leveraged finance market this year.
A spokesperson for Brookfield declined to comment. A representative for Grifols didn’t immediately respond to a request for comment.
Leveraged buyouts are one of the most lucrative areas of banking, given the rich fees on offer. Following a dearth of deals over the past few years, the Grifols take-private — alongside the stake purchase in French drug-maker Sanofi — had led to some cautious optimism that Europe’s LBO machine was starting to crank up again. The collapse of the Grifols deal threatens to temper that.
The frustration for bankers working on the transaction will be particularly acute, the people said, because the financing process has been exceptionally complex.
Banks have had to deal with requests for numerous iterations of grids, the people said. Grids consist of the list of terms lenders are prepared to offer on pricing, leverage and other metrics for an LBO. Whereas a typical grid starts by asking for details on about 15 terms, the Grifols deal required answers on over 100 terms, some of the people said.
Licking Wounds
Bankers are still licking their wounds after missing out on lucrative underwriting fees for some of the biggest deals that had been up for grabs in Europe’s leveraged finance market this year.
The private equity owners of drug-maker Stada Arzneimittel AG recently opted for a public listing after negotiations over a sale to rival investment firm GTCR cooled. Banks had been looking to line up around €6 billion for the coveted deal.
They also lost out on the opportunity to provide at least €5 billion of financing to back the potential buyout of DB Schenker when a Danish rival acquired it in an all-cash transaction. And in the case of Techem, the company’s new owners — private equity firm TPG and Singapore sovereign wealth fund GIC — introduced portability mid-way through the sales process, meaning that lenders raked in much less compensation as a result.
The only sizeable buyout financing in Europe this year has been the €8.65 billion debt package backing Clayton Dubilier & Rice’s purchase of a stake in Sanofi’s consumer health division. But even there, banks wound up receiving a lower share of the fee than usual because it was ultimately split between 22 banks, an exceptionally large number, as lenders scrapped to get a piece of the deal.
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