Bankers Pitch Up to €1 Billion Debt for Buyout of Karo Healthcare Sale

(Bloomberg) — Banks are pitching around €1 billion ($1.05 billion) in debt packages to back a potential buyout of Karo Healthcare, according to people familiar with the matter.

Private equity firm EQT AB, the owner of the Swedish consumer-health business, is working with Jefferies Financial Group Inc. and Morgan Stanley on the possible sale of the company it acquired in 2019. The €1 billion of potential debt financing that banks are offering would work out at around five times Karo’s €200 million earnings, according to a separate person.

Spokespeople for EQT and Morgan Stanley declined to comment. A spokesperson for Jefferies did not immediately return a request for comment. 

The financing of leveraged buyouts is one of the most lucrative and profitable parts of investment banking. With relatively few M&A deals currently in the market, banks have been clamoring to participate in buyout packages, driving down the cost of debt for corporate borrowers. 

The consumer-health sector is attractive to buyout firms and banks because it offers steady cash flows, even during economic downturns. 

The race to provide a debt package for Clayton Dubilier & Rice’s buyout of a stake in Sanofi SA’s consumer health division was one of the most competitive deals of last year, with 22 banks ultimately signing onto the €8.65 billion financing.  

Lenders have recently lined up loans to back several buyouts including €1.1 billion of leveraged financing to back CVC Partners’ buyout of CompuGroup Medical. 

Stockholm-based Karo Healthcare has around 460 employees and its products are marketed in more than 90 countries, according to its website. The company owns the E45 dermatology brand and sells products for coughs and colds as well as vitamins. 

A sale could value the firm at more than €2 billion, Bloomberg previously reported.

(Updates in third paragraph with Morgan Stanley decline to comment)

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