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Nordic ties up largest ever deal with $4.1bn ConvaTec buyout

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Nordic Capital, through its new fund Nordic Capital Fund VII (which has not formally closed yet), and Avista Capital Partners, a New York-based private equity firm, have acquired ConvaTec, a wound therapeutics and ostomy care products provider, from Bristol-Myers Squibb for $4.1bn (SEK 25bn), marking Nordic Capital's largest deal to date.

Robert Andreen, co-founder of Nordic Capital, told Swedish press that this deal marks a break-through for the mega-deal segment and that prices are finally coming down to more normalised levels. According to the same reports, the deal process has been going on for a while and around 50 potential buyers have been involved. "It has been said that the financing for deals above EUR1bn have been impossible. This deal clearly shows that it is possible to get the necessary financing for deals of this size," Andreen told the Swedish press. Royal Bank of Scotland, Swedbank and JP Morgan made up the consortium that provided the debt package to support the deal, according to sources. However, the debt package was only 50% of the purchase amount, and the balance was financed by equity by the two investors, with Nordic Capital investing SEK 8bn and Avista committing SEK 5bn.

It is expected that Nordic Capital will make selected add-ons to continue to grow ConvaTec to pursue the same successful strategy that the GP did with Molnlycke Healthcare, which was later sold to Apax Partners in 2005 for approximately EUR1.8bn (May 2008, page 21), and sold again to Investor AB and Morgan Stanley Principal Investments for EUR2.85bn, making a 13.5x money multiple. The deal is expected to close in Q3 of 2008.

In December 2007, Bristol-Myers Squibb announced a company restructuring strategy where non-pharmaceutical business units would either be floated or sold off. Since then the vendor has been working with different acquirers.

Nordic Capital and Avista have guaranteed the obligations of the newly formed purchaser under the purchase agreement. The two investors have entered into a fully committed loan agreement that provides for funding by the lenders with no material conditions under the purchase agreement and customary conditions relating to the delivery of closing documents and financial information as well as conditions related to the status of the acquirer.

ConvaTec, headquartered in Skillman, New Jersey, was formed in 1978, as a separate division of E.R. Squibb and Sons, L.L.C. to market the hydrocolloid ostomy skin barrier. It has over 3,000 employees and operates in 100 countries.

Bear Stearns acted as financial adviser to Nordic Capital and Avista Capital Partners, while White & Case acted as legal council to the buyout houses. Citigroup Global Markets and Morgan Stanley served as financial adviser to Bristol-Myers Squibb.