Japanese brewer Suntory SUNTH.UL has made a binding bid for soft drinks maker Orangina Schweppes, its private equity owners said, in a sign buy-out houses may find it easier to exit investments.
Suntory will pay 2.6 billion euros ($3.85 billion) for Orangina, two sources familiar with the situation said, allowing Blackstone Group and Lion Capital to double their money over the three years they owned the group.
Blackstone and Lion declined to comment on price.
Orangina -- whose cocktail of brands also includes Snapple, Oasis and La Casera -- is the second largest European producer in the still soft drinks market, the private equity firms said in a statement on Tuesday.
Blackstone and Lion bought the eponymous producer of Orangina and Schweppes for $2.6 billion in 2006, investing roughly $600 million of their own capital, before the debt markets slammed shut and buy-outs ground to a halt.
The private equity firms recapitalized the business in April 2007 with a 1.8 billion euro ($2.67 billion) loan and approached the market six months later for an additional 192 million euro add-on, according to Thomson Reuters LPC.
The deal is expected to complete around the end of October, the sources said.
Rothschild, JPMorgan, Citigroup, Blackstone Corporate Advisory, RBS and Nomura acted as financial advisers, the buyout houses said.
The secondary price on Orangina's senior loans moved closer to face value, following Suntory's approach, as investors looked forward to the prospect of repayment at par.
As Kraft's pursuit of chocolate maker Cadbury with a view to creating the world's largest confectionary group demonstrates, appetite for recession-resilient consumer businesses is growing.
While dealmaking remains at low levels, private equity firms are finding it possible to raise the financing to do deals for producers of everyday consumer items.
CVC has secured loans for around half of its $2 billion offer for the central and Eastern European brewing Assets of AB InBev, while Montagu Private Equity's sale of its sausage casing business Kalle for a more modest 212.5 million euros ($314.6 million) showed profitable exits remain possible.
An Orangina deal would be a high spot for the European private equity industry, but would also indicate a desire by Japanese drinks producers to expand overseas.
We are very used to looking on both sides of the pond for who's going to do the next deal, said Simon Hales, analyst at Evolution Securities.
(But) there is a possibility we could see some of these 'cash richer' Japanese players starting to put capital to use in more far flung markets than we have seen in the past, he added.
Japanese drinks firms are keen to enter international markets as beer sales decline in their rapidly aging home market, where the population is projected to fall by a third in coming decades.
Blackstone and Lion said social, regulatory and legal steps will need to be completed before they decide whether or not to accept the bid.
(Additional reporting by Tessa Walsh and Quentin Webb in London and Megan Davies in New York; Editing by Dan Lalor and Simon Jessop)