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    Carlyle Group to Acquire NBTY in $3.8 Billion Deal

    By Cristina Alesci – Jul 15, 2010

    Carlyle Group agreed to acquire NBTY Inc., the maker of Nature’s Bounty, MET-Rx and Solgar nutritional supplements, for $3.8 billion in the biggest leveraged buyout this year.

    NBTY rose $16.24, or 43 percent, to $53.71 by 2:45 p.m. in New York Stock Exchange composite trading after saying in a statement that Carlyle offered to pay $55 a share in cash for the Ronkonkoma, New York-based company. The offer is 47 percent higher than yesterday’s closing price.

    Carlyle beat rivals including Blackstone Group LP and TPG to win the support of NBTY’s board, according to a person involved in the deal who asked not to be identified. The Washington-based firm has been the most active in buyouts this year as the industry rushes to invest an estimated $507 billion in capital committed by investors before the buyout market collapsed in mid-2007.

    “This transaction delivers exceptional value to our shareholders,” Scott Rudolph, NBTY’s chief executive officer, said in the statement.

    The deal would be Carlyle’s largest since its $6.3 billion acquisition of nursing-home operator Manor Care Inc. in 2007, and the biggest in the industry since TPG, based in Fort Worth, Texas, and Canada’s CPP Investment Board agreed to buy software- provider IMS Health Inc. for $5.2 billion in November.
    Buyout Slump

    The pace of LBOs is accelerating after the economy and financial markets recovered. Buyouts have increased fivefold to $38.2 billion since the start of the year, compared with $7.2 billion for the same time period last year. That is still a fraction of the $207 billion in deals during the second quarter of 2009, at the peak of the buyout boom.

    Transactions are also smaller, in part because banks are lending less and demanding larger equity commitments. The average deal size so far this year is $357 million, compared with $826 million in 2007. Only 15 of the 360 deals announced this year were valued at $1 billion or more.

    Bank of America Merrill Lynch, Barclays Capital and Credit Suisse are providing $2.4 billion in debt for the NBTY takeover, according to the person, who spoke on condition of anonymity because the information is private.

    Carlyle is backing the deal with about $1.4 billion in equity, or 37 percent of the transaction value, which will be funded by its Carlyle Partners V fund. The Carlyle fund may split some of that amount with co-investors, the person said.
    Blackstone, TPG

    The other buyout firms vying for the company, including TPG and Blackstone Group LP, were seeking a partner to provide the equity capital for their offers, according to the person.

    Bank of America and Centerview Partners LLC are financial advisers to NBTY. Barclays Capital and Credit Suisse are advising Carlyle.

    Carlyle is leading leveraged buyouts this year with 15 announced deals valued at $4.4 billion, according to data compiled by Bloomberg.

    “We are impressed with the business that has been built under the leadership of Scott Rudolph, and are excited to work with him and the senior management team to drive continued growth,” Sandra Horbach, Carlyle’s head of the consumer and retail team, said in the statement.

    NBTY may solicit other bids during a 35-day period, the company said in the statement. The company lost a fifth of its value on April 27 after reporting earnings that fell short of analysts’ estimates. The stock was down 14 percent this year through yesterday.
    S&P Watch

    Under the terms of the Carlyle offer, shareholders will get about $3.54 billion in cash, based on 64.3 million outstanding NBTY shares at the end of March. The company had $226 million in net debt, according to data compiled by Bloomberg.

    Standard & Poor’s analyst Jacqueline Hui said she may lower NBTY’s BB corporate credit rating if the transaction leads to a “material” deterioration in the company’s credit measures.

    NBTY’s board has unanimously approved the takeover and recommended the offer to shareholders. The purchase is scheduled to be completed by the end of 2010.

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