Mizuho and KKR chalk out at final deal terms for Avendus Capital

(From left): Avendus co-founders Ranu Vohra, Gaurav Deepak and Kaushal Aggarwal

A year-long negotiations with multiple potential M&A suitors might have just reached some finality in KKR-owned Avendus Capital. According to highly placed sources with knowledge of the matter, KKR and Mizuho Financial Group are the final stages of closing a deal which might see the Japanese financial major take a majority stake in Avendus Capital, piping competitors such as Nomura Holdings and Carlyle.

The final deal terms are under consideration. “This includes HR related aspects and the continuity of promoters after the deal closure,” said a banker aware of the talks.

To put things in context, Avendus was founded by Ranu Vohra, Gaurav Deepak and Kaushal Aggarwal in 1999. Among the three promoters, who hold roughly 5 – 7 percent stake each, co-founder Gaurav Deepak is presently the CEO of Avendus Capital. “One of the promoters was initially not in favour of a strategic sale and was working out permutations to rope in one or more financial investors to take over the shares of exiting investors including KKR. With those talks hitting a rough patch, it would be interesting to see if this promoter opts to continue with the company post Mizuho’s entry,” said another person with knowledge of the matter.

The sources cited say negotiations on the finer aspects of the deal, notably continuation of the original promoters of the company and the role they would play post-acquisition by Mizuho are factors which are under consideration. “It is quite likely that if a promoter opts out of the company post the deal, Mizuho may impose a two-year handover clause for the exiting promoter. As the case is with KKR, Mizuho may also impose certain non-compete clauses for key managerial persons including the existing promoters of Avendus in case they decide to move out of the company,” said a source cited above.

People familiar with the matter say that while the final binding bids came in by mid-January and terms regarding valuations more or less became clear by early February, it is these promoter-related discussions which is holding up the crystallisation of the deal.

“It has now reached a stage where KKR has to take a call on the transaction and cannot keep the bidders waiting for longer,” said a banker who didn’t want to be named. When asked for comments regarding the deal and role of promoters post the deal, a spokesperson for Avendus Capital replied over an email saying “We strongly refute the claims in your query. These assertions are completely inaccurate and have no factual basis”.

Spokesperson for KKR said they would decline to comment on this matter. An email sent to Mizuho remained unanswered till publishing the article.

KKR acquired a little over 60 percent stake in Avendus in 2015. A year ago, the US-headquartered PE major decided to fully exit its investment in the company. Gaja Capital and Yogesh Mahansaria, founder and CEO of Alliance Tire Group, who collectively hold about 20 percent stake may also be seeking an exit from Avendus along with KKR. The remaining shares are held by the company’s original promoters.