Exclusive: KAR Auction exploring leveraged buyout - sources

NEW YORK (Reuters) - Vehicle auction company KAR Auction Services Inc (KAR.N) has held exploratory talks with private equity firms about a potential leveraged buyout, two people familiar with the matter said on Wednesday, in a deal that would top $4 billion.

Kelso & Co, Goldman Sachs Capital Partners (GS.N), ValueAct Capital LLC and Parthenon Capital LLC, which collectively own about 78 percent of KAR, have reached out to other buyout firms to discuss a sale, the people said.

KAR, which has a market value of close to $2.3 billion and debt of around $1.8 billion, has held discussions on a possible buyout that are still in early stage and there can be no certainty they will result in a transaction, the people added.

Kelso declined to comment while representatives of KAR, Goldman Sachs, ValueAct and Parthenon did not respond to a request for comment.

KAR shares jumped more than 6 percent on the news and were trading at $17.91 in late afternoon trading.

KAR's efforts underscore the robust appetite for secondary buyouts - sales from one private equity firm to another - as the industry is flush with capital looking to be put to work.

Carmel, Indiana-based KAR, through its used-car wholesale auctions arm ADESA Inc, is the second-largest competitor in whole car auctions in the United States behind Cox Enterprises Inc's Manheim unit, according to Standard & Poor's.

KAR was taken private in 2007 in a $3.7 billion leveraged buyout. The buyout firms then relisted in the company in 2009, raising $332 million. KAR posted adjusted earnings before interest, tax, depreciation and amortization for 2011 of $487.2 million.

(Reporting by Greg Roumeliotis in New York; Additional reporting by Soyoung Kim in New York; Editing by Gary Hill and Gunna Dickson)