(Bloomberg) — Private credit lenders are in talks to provide about $4.5 billion of debt to fund Sycamore Partners’ potential buyout of Walgreens Boots Alliance Inc. as part of a plan to split up the pharmacy retailer into separate businesses, according to a person with knowledge of the matter.
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HPS Investment Partners and Ares Management Corp. are among lenders vying to finance what would be one of the largest leveraged buyout debt deals to hit the market in more than a decade, said the person, who asked not to be identified discussing confidential information.
Sycamore’s acquisition would split up Walgreens’ business segments and finance them individually, said the person, a move the private equity firm has done with past transactions including for Staples Inc. While discussions are at an advanced stage, the acquisition and financing plans could still be delayed or falter, the person said.
The private credit financing is part of a debt package of as much as $12 billion that Sycamore is lining up to finance the acquisition, which could value the company at almost $20 billion, the person said. Banks including Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., UBS Group AG and Wells Fargo & Co. are also working on financing proposals, Bloomberg previously reported.
HPS is leading a $2.5 billion first-lien term loan to one part of Walgreens’ business: Shields Health Solutions, a specialty pharmacy unit that partners with health care providers.
The private loan, which will mature in six years, is being discussed at around 6 percentage points over the benchmark rate, the person said. Goldman Sachs Asset Management and JPMorgan are also participating in the loan, they added.
Representatives for Sycamore, HPS, Ares, Goldman Sachs and JPMorgan declined to comment. A representative for Walgreens didn’t immediately respond to requests for comment.
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While private credit and banks are often in tight competition to win deals, the size of the Walgreens acquisition presents an opportunity for both markets to write checks.
Direct lenders and banks are also in talks to provide a $4 billion asset-based loan, which would finance Walgreens’ retail business and would be secured by inventory, receivables and prescriptions, the person said.
