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Air Liquide’s Disinfectant Unit Sale Hit by Tighter Funding

Air Liquide’s Sale of Disinfectant Unit Hit by Tighter Financing

(Bloomberg) -- Tightening credit for leveraged buyouts is beginning to impact even one of Europe’s most hotly contested auction processes.

The sale of Air Liquide SA’s German disinfectants unit Schuelke was dealt with a blow when JPMorgan Chase & Co., the main bank offering financing to bidders, reduced the amount of leverage it is willing to provide, people familiar with the matter said.

The change prompted at least one private-equity suitor to drop out of the bidding before the latest round of offers due this week, according to the people, who asked not to be identified because the information is private. The lower amount of debt funding -- combined with rising price expectations -- meant an investment would be less profitable, the people said.

Shares of Air Liquide fell as much as 2.6% in early Friday trading. They were down 1.6% at 9:20 a.m. in Paris, giving the company a market value of about 51 billion euros ($57 billion), while the benchmark CAC 40 Index dropped 2.1%.

European buyout firms Ardian, EQT AB and PAI Partners submitted non-binding offers this week and have been invited to join the next round, the people said. While Air Liquide has been seeking a valuation of as much as 1 billion euros, Schuelke could fetch more than initially expected after demand for its products was boosted by the coronavirus epidemic, according to the people.

Representatives for Air Liquide, JPMorgan and the bidders declined to comment.

Schuelke supplies industrials disinfectants used in cleaning products, as well as as antibacterial hand gels and additives for the cosmetic and food industries. JPMorgan is advising Air Liquide on the sale and offering so-called staple financing to bidders, the people said.

Lenders are becoming increasingly wary of extending credit for acquisitions as market volatility surges. Already, banks exposed to the multibillion-dollar financing for the buyout of Thyssenkrupp AG’s elevator unit risk facing losses on their exposure to the deal.

In recent weeks, Bank of America Corp. pulled out of financing a private-equity purchase of Huntsworth Plc, which is the biggest take-private of a U.K. company this year, Bloomberg News has reported.

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