UPDATE 3-CD&R-led group to buy France's Spie for 2.1 bln euros

Tue May 31, 2011 8:57am EDT

* Deal to be financed with 1.3 billion euros of debt-sources

* CD&R provides about 400 million euros of equity-source

* Buyers also include Axa PE, Caisse des Depots de Quebec

* Spie says CD&R group was one of several interested buyers

* Deal latest in series of PAI sale deals

(Adds link to additional graphic, background on PAI)

By Christian Plumb and Victoria Howley

PARIS/LONDON, May 31 (Reuters) - A group led by Clayton Dubilier & Rice (CD&R) agreed to buy French engineering group Spie in a deal valuing it at 2.1 billion euros ($3 billion), in the biggest French leveraged buyout since the 2008 financial crisis.

French private equity group PAI Partners, which said in March it was considering a possible sale of the electrical and mechanical engineering firm, confirmed a deal to sell it to a group also including a unit of French insurer AXA (AXAF.PA) and Canada's Caisse des Depots du Quebec.

More than half the deal's value, or 1.3 billion euros, was financed by debt, sources said. CD&R provided about 400 million euros of equity.

The deal is the biggest of a recent string of private equity investments in France and is the latest in a series of European leveraged buyouts (LBOs) bolstered by the recovery of financing markets after the 2008 financial crisis.

Other recent deals include CVC Partners' purchase of a majority stake in French rail equipment Delachaux DELX.PA and the purchase of upscale shoemaker Jimmy Choo by luxury goods group Labelux.

Spie said in a statement the CD&R deal was one of several indications of interest it received and would be positive for the company's prospects, because of an employee share ownership scheme that would link pay to performance.

Spie's origins lie in managing electrical power for Paris' train and tramway lines in the early 1900s. Today it operates in 30 countries and earns 38 percent of revenue outside France.

The new owners plan to take the company public in about three years after some planned bolt-on acquisitions in northern Europe, according to a person familiar with the matter. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic on M&A r.reuters.com/kyb46q Top French private equity deals r.reuters.com/fyw79r ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

ACQUISITION TRAIL

Spie Chief Executive Gauthier Louette told reporters in March he favoured an initial public share offering for the company in the long run.

Spie, which had an operating profit of 192.3 million euros in 2010, has already been on the acquisition trail in recent years, having acquired at least 50 companies across Europe and increasing its workforce to 29,000 from 23,000.

The new owners, who had made a pre-emptive bid before a sale process had started, are putting about 800 million euros into the company, of which 400 million comes from CD&R, the person familiar with the matter said.

PAI Partners has sold various portfolio companies in recent months, including a 50 percent stake in yoghurt maker Yoplait (GIS.N) and Italian clothing retailer Gruppo Coin GCN.MI as it prepares the ground for a new fund after a management upheaval that nearly marked its demise.

PAI, which bought Spie for about 1 billion euros in 2005, is at least quadrupling the money it put into the original deal through the sale, the person said.

The former private equity arm of BNP Paribas (BNPP.PA) replaced former chairman and chief executive Dominique Megret with Lionel Zinsou, a former Rothschild banker, after lenders wrestled back control of one of PAI's portfolio companies, roofing business Monier, in 2009.

The Spie deal is the latest in a series of large deals for CD&R, which in February agreed to buy U.S. healthcare and physician services company Emergency Medical Services Corp EMS.N for about $3 billion and last fall agreed to buy a 42.5 percent stake in Dutch chemicals company Univar [UNIV.UL].

HSBC, Morgan Stanley and Societe Generale have been mandated to underwrite the financing for the buyout, which will include senior secured bank debt as well as a bridge loan to a high-yield bond, banking sources said.

The total size of the financing is expected to be above 1 billion euros, the banking sources added.

PAI was advised on the deal by SocGen and Deutsche Bank while the buyers were advised by HSBC, Morgan Stanley and Lazard. (Additional reporting by Isabell Witt and Natalie Harrison in London, with Julien Ponthus in Paris; Editing by Greg Mahlich and David Holmes) ($1=0.7 euros)

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