In This Article:
(Bloomberg) -- Citigroup Inc. and Apollo Global Management Inc. are offering potential buyers of Boeing Co.’s Jeppesen navigation unit the option to fund the acquisition through the pair’s nascent private credit partnership, according to people familiar with the matter.
Most Read from Bloomberg
-
ICE Eyes Massive California Tent Facility Amid Space Constraints
-
Washington, DC, Region Braces for ‘Devastating’ Cuts from Congress
For Citigroup and Apollo, it would mark their first private staple financing, one of the people said, in which the US investment bank leverages its merger and acquisition advisory capabilities for Boeing, with cash from the private equity firm. Private staple is a form of pre-agreed funding used to support an acquisition.
The development comes as Wall Street banks dedicate more of their balance sheets to private credit in a bid to compete with direct lenders in the leveraged-finance business. These tussles are particularly fierce in debt-fueled takeovers, where both private credit and Wall Street banks are grappling with a slowdown in M&A activity.
For Boeing, the sale of Jeppesen could fetch the aircraft manufacturer approximately $7 billion, said the people, who were not authorized to speak publicly. They estimated the debt financing to be between $3 billion and $3.5 billion.
There is no guarantee that the bidders who accept that financing would win the deal, and buyers may choose to use other lenders instead. Discussions are ongoing and terms of the deal and financing could still change, the people added.
Both corporate and private equity buyers interested in acquiring Jeppesen are being offered the private debt option, the people said. This would be a major test of the Citi-Apollo partnership, announced last September, and its ability to win over a buyer with a supporting financing package.
Spokespeople for Citigroup and Apollo declined to comment, while a representative for Boeing said the company “does not comment on market rumors or speculation.”
Under their arrangement, Citigroup and Apollo agreed to work together on $25 billion worth of deals over five years. Citigroup will source new financing opportunities from its clients and pocket a fee for originating any transaction, while Apollo will provide the cash.
However, the carve out of Jeppesen is a rare instance of a leveraged buyout in today’s market. Such deals have been few and far between to start the year, due to uncertainty about regulatory policies under President Donald Trump and the direction of the US economy.