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Private Equity Firm EQT OK’d to Buy Dometic

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April 21, 2011 by   Leave a Comment

Swedish private equity firm EQT [EQTPRK.UL] gained EU regulatory approval on Tuesday (April 19) to acquire Swedish refrigeration group Dometic, Reuters has reported.

The European Commission, the EU competition watchdog, said the deal would not have an adverse effect on market competition.

Other details were not immediately available.

Dometic was created as a brand in the U.S. 1968 when the Electrolux Leisure Appliances still was a part of the Electrolux Group. It was natural that this brand was selected as the company name when Electrolux divested the Leisure Appliances, 2001 to EQT. Dometic´s business is largely based on the invention of the absorption technology that goes back to 1922 when Carl Munters and Baltzar von Platen invented this cooling technology. Dometic is still the absorption cooling specialist.

Dometic is known as the supplier of high quality products with a high degree innovation to the RV and marine industries. Under the Dometic brand it supplies these industries with a very extensive range of different appliances and products.

While the strength of the Dometic brand was born on the invention of absorption technology, it has grown to include awnings, climate control products, sanitation products and windows/doors that stand on their own as quality representatives of a truly global brand. The Dometic brand is today associated with market leadership, comfort and strength. People entrust their adventures to Dometic, the world leader in comfort.

Background on the Sale

EQT  will issue a rare payment in kind (PIK) bond to part-fund its acquisition of Swedish refrigeration group Dometic Group, Reuters reported earlier this month.

EQT — backed by Sweden’s Wallenberg family — will fund the 12 billion Swedish crowns ($1.9 billion) acquisition agreed in February with the proceeds of the 200 million euro ($288 million) PIK bond, approximately 5.7 billion crowns of drawn senior loans and a 4.6 billion crown cash contribution.

EQT has opted to issue a PIK bond to take advantage of high-yield bond market liquidity and complete the financing quickly without having to revise the company’s existing capital structure, a banker said.

Dometic’s PIK bond, expected to be rated triple-C, will be a key test of investor risk appetite for more aggressively structured bonds, banking sources said.

PIK bonds are viewed as aggressive bull market instruments and were last seen in number at the peak of the market immediately before the credit crunch.

“Given the strength of the high-yield market, it (EQT) could keep this instrument pretty well priced,” said a banker familiar with the PIK bond.

In addition to the PIK bond, EQT has refinanced an existing 8 billion crown restructuring loan, which was put in place in 2009, when banks took control of Dometic, according to Thomson Reuters LPC data.

Banks own 70% of Dometic after its original owner, BC Partners, opted not to put more equity into the company after the credit crunch.

The PIK bond, which will be issued out of a holding company called Frostbite, is the first European deal of its kind since December 2009 when Italian telecoms company Wind launched a two-part 12.25% 750 million euro bond.

It follows similar transactions in the United States from companies including canned seafood company Bumble Bee and restaurant chain operator CKEHoldings.

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