Charterhouse clinches Coral, closes on E1.4bn

The London LBO house has bought Coral Eurobet for £860m from Morgan Grenfell Private Equity.

As far as good weeks go, the one that London buyout house Charterhouse Development Capital is enjoying takes some beating.

The firm announced today the £860m purchase of Coral Eurobet, the UK bookmaker that was put up for sale by Morgan Grenfell Private Equity 18 months ago. The secondary buyout makes it two deals in as many weeks for Charterhouse, which last week played a lead role in the E1.9bn takeover of TDF from France Telecom.

Yesterday the firm also held a first closing of its seventh buyout fund, which is currently in the market with a E3bn target. The closing, on E1.4bn of commitments, was timed to coincide with the Coral deal today, in order to enable the new fund to make an equity investment in the transaction.

In clinching the deal, Charterhouse beat off competition from rival private equity firms Candover and BC Partners, as well as potential trade buyers Rank and Gala.

According to Jeremy Greenhalgh, a director at Charterhouse, the firm had worked hard to ensure early on in the deal process that a commitment from Coral’s management team to work with Charterhouse was in place. “No one in the market new that we were close to the deal and management’s preferred partner. We knew we were competitive on price, but way ahead on process. Rank was planning on making its offer today. We made an unconditional offer a week ago and have been negotiating the contract since.”

To fund the buyout, Lehman Brothers arranged a proprietary £610m debt package consisting of £400m of senior debt, £135m of mezzanine and $75m of PIK financing. Charterhouse put £272m of equity capital into the deal. Payment of £10m of the purchase price has been preferred.

Lehman, whose M&A team advised the seller, also agreed to providing an £80m equity facility as well as £15m of working capital to Coral. Together with another £40m of equity that Charterhouse has earmarked for the business, Coral thus has £135m to fund future growth and acquisitions.

The deal marks an important exit for Morgan Grenfell Private Equity, which is currently winding down its portfolio. MGPE had acquired Coral from Ladbroke in a £390m purchase.