The deal value works out to about 13 times the company's $130 million annual Ebitda, keeping with the trend of high multiples in private equity exits.
Tom Ellison, the son of the late Savers founder, William Ellison, along with the company's management will hold a majority stake in the company after the buyout, according to a person familiar with the situation. The total equity contribution, which will come from Ellison, the company's management and Leonard Green, will be about $750 million, this person said.
Goldman, Sachs & Co. and Crescent Capital Group LP are leading the financing with a total debt package of about $950 million, the source said. Total leverage works out to be about 7 times, according to another person with knowledge of the deal.
Goldman is providing an approximately $650 million senior secured loan. A $100 million revolver will remain at closing. Crescent Capital, which is also in the middle of raising a new fund, is providing nearly $300 million of mezzanine financing.
Barclays Capital, one of the seller's advisers, had initially offered a staple financing package. Moelis & Co. was also a sell-side adviser.
Financial sponsors often opt for high-yield debt over mezzanine debt, which is usually a more expensive source of financing. But when the high-yield market is choppy, the certainty of getting a deal completed can trump concerns about the cost. Lower interest rates also lower the long-term cost of mezzanine debt.
Crescent has worked with Leonard Green and other large private equity firms recently. For instance, Crescent provided about $400 million of mezzanine financing for Leonard Green's $1.6 billion acquisition of Jo-Ann Stores Inc. in December 2010. Crescent also worked with TPG Capital and Canada Pension Plan Investment Board in the $5.2 billion deal for IMS Health Inc. in November 2011 and TPG's $1.3 billion buyout of American Tire Distributors Holdings Inc. in April 2010.
TPG Capital and Berkshire Partners LLC also bid on Savers.
Savers is the largest for-profit secondhand merchandise retailer in the U.S., Canada and Australia. The company buys clothing from nonprofit organizations such as Easter Seals and the American Cancer Society, and sells it to the public for a profit through its 270 stores.
The company opened its first store in San Francisco in 1954. William Ellison had followed in his father Benjamin's footsteps. Benjamin Ellison was a Salvation Army career officer during the Depression and managed secondhand clothing stores, according to William Ellison's obituary. The company touts its "unique business model of purchasing, reselling and recycling donated items. Every location has a local nonprofit partner in its community, and each store pays its nonprofit partner for every secondhand item donated, including clothing, housewares, furniture and more," according to its website, which also said: "Last year Savers, Inc. paid $144 million dollars to its nonprofit partners and more than $1 billion over the past 10 years."
Leonard Green will be the third financial sponsor to invest in Savers. Freeman Spogli acquired Savers for about $550 million in July 2006 from Berkshire Partners, a Boston-based buyout shop that bought the company in a 2000 recapitalization. Under Freeman Spogli, the company's Ebitda increased from about $60 million in 2006 to $130 million in 2011. It has also opened at least 70 stores and bought 18 more from thrift store chain Unique Thrift LLC in March 2011 for an undisclosed price.
Goldman, Crescent, Barclays, Leonard Green and Moelis declined to comment. Freeman Spogli didn't return calls.
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