Without question KKR has clocked into warp speed with deal-making. Since January, it has offered $45bn for energy company TXU in the largest buyout ever and spent $7.3bn to buy discount store Dollar General. It's at the centre of a high-profile battle to take over supermarket chain J. Sainsbury in the UK and just bid Â£11.4bn for retailer Alliance Boots. Yet its Monday overture to buy First Data just may trump all these others. It is making the $29bn bid for the company all on its own.
But it's not just this deal-doing velocity that may propel KKR back into the industry's record books. With about $1.9bn of ebitda, KKR is paying a lofty multiple of 15 times for First Data. That's about 40% more than where First Data's competitors trade on the public market. What's more, KKR will be financing the deal with about $21bn of debt - a racy 11 times its operating cash flow. On average, last year's buyouts were financed at 5.5 times, according to S&P/LCD. True, the company's profits are tied to consumer spending, and have proven stable. And the banks may give First Data credit for some of the cash it receives from joint ventures. But even with the cash from alliances, the deal is still financed at well over 10 times ebitda.
Full article from Breaking Views (probably will disappear behind a firewall soon).