Blackstone seeks private credit for US$2.3 billion Rover buyout

BLACKSTONE has approached direct lenders for help financing its US$2.3 billion acquisition of Rover Group, seeking about US$250 million of private debt, according to sources with knowledge of the matter.

The private equity titan has sought a loan for the online pet care company that would pay interest of about 475 basis points over the Secured Overnight Financing Rate, the sources said. Should Blackstone succeed in borrowing at that level, it would mark one of the cheapest private credit deals on record, according to data compiled by Bloomberg.

At least some lenders have pushed for a higher price, according to the sources, who asked not to be named as the discussions are private. Talks are ongoing and details of the financing may change, the sources added.

A representative for Blackstone declined to comment. Rover did not respond to a request for comment.

Blackstone’s acquisition is conservative compared to other technology company buyouts – it may leave Rover with a debt-to-earnings ratio of about four times, although that figure could change, according to the sources. Debt-fuelled buyouts typically leave a company with a debt pile of six times their earnings or more.

High leverage or a more aggressive form of financing may not be palatable to potential lenders as Rover’s business model is dependent on pet adoption trends and a variable user base in a competitive industry, according to the sources.

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The purchase price of US$2.3 billion is about 10 times Rover’s expected 2023 revenue, company filings show. A loan of US$250 million to help fund it means Blackstone is seeking relatively little debt compared to other leveraged buyouts.

The acquisition of Rover is expected to close in the first quarter of 2024, according to a November statement. BLOOMBERG