The bidding war for Kinetic Concepts Inc. (NYSE:KCI) is over, after a competing offer by rival ConvaTec collapsed after a key financing prop was removed.
KCI agreed in July to a $6.3 billion offer from private equity buyer Apax Partners. In August ConvaTec, which is backed by Nordic Capital Partners and Avista Capital Partners, made an 11th-hour play.
Even then there were question about the deal’s financing. Today the answer came when a third party to the deal, a pharmaceutical firm that had agreed to buy a KCI subsidiary, bailed out of the negotiations, according to news reports.
“There was then a hole in the financing that they could not fill,” according to an un-named source quoted in the Danish newspaper Dagens Industri, Reuters reported. And “a person familiar with the bid” confirmed to Bloomberg that ConvaTec’s backers were pulling the plug on the deal.
Apax and a pair of Canadian pension funds agreed July 12 to buy KCI for a 6 percent premium over its closing price that day. The London-based PE firm and its partners plan to finance the buyout with about $5 billion in debt, backed by lenders Bank of America Corp., Credit Suisse Group AG and Morgan Stanley. The ConvaTec bid just beat the expiration of a 40-day “go-shop” period during which KCI could solicit other offers.
Avista had been mulling a joint bid for KCI with Bain Capital LLC before Bain pulled out of the talks. The Boston-based PE titan withdrew over concerns about obtaining financing and about the price of the deal.