JAB Said to Offer Terms for Master Blenders $4.3 Billion Loan

Joh. A. Benckiser set the terms for 3.3 billion euros ($4.3 billion) of loans backing its acquisition of coffee maker D.E Master Blenders 1753 NV, according to four people with knowledge of the matter.

The proposed deal for the investment arm of the billionaire Reimann family comprises a 1.25 billion-euro three-year term loan A, a 1.75 billion-euro five-year term loan B, and a five-year 300 million-euro credit line, said the people, who asked not to be identified because the deal is private. The borrower held a meeting for prospective lenders in London yesterday.

Vienna-based JAB agreed to buy the maker of Douwe Egberts for about 7.5 billion euros in the coffee industry’s biggest deal ever. The transaction is subject to shareholders controlling 95 percent tendering their shares and may be completed in late July or early August, interim chief executive officer Jan Bennink said earlier this month.

JAB is offering to pay interest of 350 basis points, or 3.5 percentage points, more than the euro interbank offered rate on the shorter loan, while the five-year facilities would pay margins of 375 basis points, the people said. The term loan B includes a 1 billion-euro portion that may be sold to institutional investors, said the people. The so-called carve-out will have a 1 percent Euribor floor.

Sabine Post, an Amsterdam-based spokeswoman for JAB, said the company doesn’t comment on market rumors.

Banks have been asked to commit 200 million euros each to the deal in exchange for a fee of 150 basis points, the people said. Including the acquisition financing, the ratio of debt to earnings before interest, taxes, depreciation and amortization is about 5.5 times.

The acquisition is also being funded with 4.9 billion euros of equity, the company has said. Arrangers of the debt are Bank of America Corp., Citigroup Inc., Morgan Stanley and Rabobank International.

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