HgCapital has proposed to buy internet service provider Group NBT in an all-cash deal. It is the first time in recent memory Hg has fully underwritten a deal, according to the firm – a reflection of how difficult it is for private equity firms to access debt financing at the moment.
The offer values NBT at approximately £153 million (€175 million; $236 million), or 550p a share. That represents a 22.5 percent premium to the closing price on the day before the bid was announced, and a 33.2 percent premium to NBT's 12 month average price of 413 pence. It also exceeds the highest price at which NBT shares have traded at any point in the last ten years.
The all-cash offer must be approved by a majority of shareholders at the Court Meeting and the General Meeting. However, it already has the unanimous recommendation of the NBT board, and the consent of its four largest shareholders, who together speak for about 33% of its ordinary shares. NBT says that Hg will help it to grow through product development and bolt-on acquisitions.
HgCapital has chosen to take this approach now because debt is hard to come by and can slow down transactions significantly, according to a source familiar with the deal. Due to continuing market uncertainty and difficulties in the debt market, firms may increasingly look to do full equity transactions, which are likely to be easier and more efficient. However, although no third-party financing will be provided at this stage, Hg may consider leveraging its equity in the future, the source said.
The investment is being made from the fund Hg 6, which closed last year. It is roughly €2 billion in size and is about 50 to 60 percent deployed, according to a person with knowledge about the matter. The deal would be part of HgCapital’s long-standing strategy to invest in the technology, media and telecommunications (TMT) sector. In March 2011, Hg also started raising a £400 million (€458 million; $618 million) fund that will be dedicated to smaller-size TMT investments. The firm declined to comment about other upcoming deals.