Techem
JPMorgan, Goldman Sachs Prepared to Offer Staple Financing Levered at 6.5x for Techem; Macquarie, KKR Infrastructure, CVC, Brookfield Preparing NBOs for Company at 12x-14x €500M EBITDA
Thu 11/23/2023 12:52 PM
Relevant Documents:
Q3 Report
Q3 Presentation
JPMorgan and Goldman Sachs are prepared to provide staple financing of 6.5x leverage for German metering company Techem, sources told Reorg.
The banks are looking to provide senior debt at 5.75x comprising a mixture of loans and bonds and another 0.75x of junior debt, with the possibility of PIK notes for the junior portion, sources said. The proposed financing is a soft staple as bidders will be able to work on their own solutions, the sources added.
Banks’ leveraged finance desks have traditionally funded the company, but various options are still on the table including infrastructure style debt, sources said.
Macquarie, KKR Infrastructure, Brookfield and CVC Capital Partners are preparing to submit nonbinding offers for Techem by Dec. 14, sources said. A shortlisting of bidders is scheduled to take place in early January, the sources added.
Partners Group is seeking a valuation multiple of 16x Techem’s marketed EBITDA of about €500 million, sources said. However, the potential bidders are more likely to offer a multiple of 12x to 14x, the sources added.
Based on Fundamentals transaction database by Reorg, similar service companies with recurring revenue were valued at EV/EBITDA multiple post-IFRS 16 between 12.6x and 10.1x, as shown in the table below, although we note that Techem’s high margins could command a valuation closer to the upper end of the range, in line with alarm systems business Verisure.
JPMorgan, Goldman Sachs and UBS distributed information memoranda as part of a dual-track process for Techem in early November, as reported. However, the company will likely be sold rather than listed owing to the current market conditions, sources said.
Techem has strong recurring revenue streams making it attractive to infrastructure funds and private equity firms alike, sources said.
Lenders like Techem due to its strong EBITDA margins and historical stability of earnings, but are grappling with the company’s high capital expenditure requirements, sources said. The business is also transitioning to smart meters, which will require additional R&D spend and curb free cash flow, the sources added. This capex is required to support the company’s growth but will restrict the leverage on the cash-paying portion of the debt, sources said.
In 2018, Techem was acquired by a consortium comprising Partners Group, Caisse de dépôt et placement du Québec, or CDPQ, and Ontario Teachers’ Pension Plan, or OTPP, from Macquarie Infrastructure and Real Assets. At that time, Techem was valued at 12.2x EBITDA pre-IFRS 16, or 11.8x EBITDA post-IFRS 16.
The company reported LTM EBITDA of €478.5 million and LTM revenue of €981.3 million on June 30, as reported.
The business had €2.782 billion of total net debt as of June 30 including a €1.145 billion term loan B due 2025, €1.145 billion senior secured notes due 2025 and a €275 million RCF due 2025, according to Reorg’s capital structure as of June 30.
Techem owns 55.1 million metering devices and has 12.5 million homes in service across 18 countries, according to its website.
Partners Group, OTPP, CDPQ, Macquarie, KKR Infrastructure and Brookfield declined to comment. JPMorgan, Goldman Sachs and CVC Capital Partners did not respond to requests for comment by time of publication.
Q3 Report
Q3 Presentation
JPMorgan and Goldman Sachs are prepared to provide staple financing of 6.5x leverage for German metering company Techem, sources told Reorg.
The banks are looking to provide senior debt at 5.75x comprising a mixture of loans and bonds and another 0.75x of junior debt, with the possibility of PIK notes for the junior portion, sources said. The proposed financing is a soft staple as bidders will be able to work on their own solutions, the sources added.
Banks’ leveraged finance desks have traditionally funded the company, but various options are still on the table including infrastructure style debt, sources said.
Macquarie, KKR Infrastructure, Brookfield and CVC Capital Partners are preparing to submit nonbinding offers for Techem by Dec. 14, sources said. A shortlisting of bidders is scheduled to take place in early January, the sources added.
Partners Group is seeking a valuation multiple of 16x Techem’s marketed EBITDA of about €500 million, sources said. However, the potential bidders are more likely to offer a multiple of 12x to 14x, the sources added.
Based on Fundamentals transaction database by Reorg, similar service companies with recurring revenue were valued at EV/EBITDA multiple post-IFRS 16 between 12.6x and 10.1x, as shown in the table below, although we note that Techem’s high margins could command a valuation closer to the upper end of the range, in line with alarm systems business Verisure.
(Click HERE to enlarge)
JPMorgan, Goldman Sachs and UBS distributed information memoranda as part of a dual-track process for Techem in early November, as reported. However, the company will likely be sold rather than listed owing to the current market conditions, sources said.
Techem has strong recurring revenue streams making it attractive to infrastructure funds and private equity firms alike, sources said.
Lenders like Techem due to its strong EBITDA margins and historical stability of earnings, but are grappling with the company’s high capital expenditure requirements, sources said. The business is also transitioning to smart meters, which will require additional R&D spend and curb free cash flow, the sources added. This capex is required to support the company’s growth but will restrict the leverage on the cash-paying portion of the debt, sources said.
In 2018, Techem was acquired by a consortium comprising Partners Group, Caisse de dépôt et placement du Québec, or CDPQ, and Ontario Teachers’ Pension Plan, or OTPP, from Macquarie Infrastructure and Real Assets. At that time, Techem was valued at 12.2x EBITDA pre-IFRS 16, or 11.8x EBITDA post-IFRS 16.
The company reported LTM EBITDA of €478.5 million and LTM revenue of €981.3 million on June 30, as reported.
The business had €2.782 billion of total net debt as of June 30 including a €1.145 billion term loan B due 2025, €1.145 billion senior secured notes due 2025 and a €275 million RCF due 2025, according to Reorg’s capital structure as of June 30.
Techem owns 55.1 million metering devices and has 12.5 million homes in service across 18 countries, according to its website.
Partners Group, OTPP, CDPQ, Macquarie, KKR Infrastructure and Brookfield declined to comment. JPMorgan, Goldman Sachs and CVC Capital Partners did not respond to requests for comment by time of publication.
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