TPG, Goldman in $1.5 billion deal for Candover's Ontex

LONDON (Reuters) - U.S. buyout firm TPG TPG.UL and the private equity arm of Goldman Sachs (GS.N) on Thursday agreed to buy diaper-maker Ontex from rival Candover (CDI.L) in the year's largest European buyout.

The deal, which Candover said values Ontex at 1.2 billion euros ($1.53 billion) including debt, is Europe's largest buyout this year, just ahead in dollar terms of KKR's KKR.UL 955 million pound ($1.47 billion) deal for Pets at Home.

In a separate development, Candover shares fell 7.2 percent after the Financial Times reported that talks to sell the private equity firm to a Canadian pension fund were on the brink of collapse.

Private equity firms are competing aggressively for deals. They are increasingly buying companies from each other, in so-called secondary buyouts, as they look to deploy hundreds of billions of dollars of unspent funds.

Based in Zele, Belgium, Ontex says it is Europe's market-leading maker of private-label hygiene products including diapers and wipes. Its sale marks another exit for Candover, whose reputation has been tarnished by the high-profile blow up of its 2008 fund.

The firm is set to lose 87 million euros on its investment, after the business ran into serious headwinds, including higher raw material costs and a price war with branded competitors, shortly after Candover bought it in 2003.

Having written the business down to around 25 percent of cost, Candover is selling it for about 70 percent of cost, roughly in line with its current book value, a source familiar with the situation said.

A second source said the new owners would fund about 400 million euros of the purchase in equity, and the overall price equated to about 7.3 times Ontex's historic earnings before interest, tax, depreciation and amortization (EBITDA).

Ontex said the deal was the largest-ever private-equity transaction in Belgium and it expected the takeover to close before year-end.

Candover is also reviewing options for Parques Reunidos, the Spanish company that is Europe's second-biggest theme-park operator, and has received offers for the business from rival private equity firms, sources said.

The FT on Thursday reported Apollo Management APOLO.UL, Providence and a consortium of Carlyle CYL.UL and Advent International were likely to submit second-round bids for the business. The private equity firms declined to comment.

TAKEOVER TALKS

Having knocked back approaches for the firm last year at the height of its troubles, Candover is in talks with Canadian pension fund Alberta Investment Management Corporation about a sale of the company.

Shares in Candover fell 7.2 percent to 675 pence after the FT's report that those talks were on the brink of collapse.

Candover declined to comment on talks with its potential acquirer. AIMCO did not respond to requests for comment.

Candover's listed entity, Candover Investments Plc, owns the unlisted private-equity manager Candover Partners, but the subsidiary is independently run.

"We are not surprised that the negotiations on a bid for Candover appear close to an end. The share price has been implying for the last few weeks that the market thought this bid was unlikely to materialize," said Oriel Securities analyst Iain Scouller in a note.

However, a source familiar with the process said discussions were never that advanced and a deal had not been imminent.

Confirming the approach in April, Candover said an offer for the company would be no higher than its last reported net asset value of 1,038 pence a share.

($1=.7869 Euro)

($1=.6517 Pound)

(Additional reporting by Victoria Howley; Editing by David Cowell and Erica Billingham)