UPDATE 1-Private equity owners pick IPO banks for Grohe

Mon May 13, 2013 12:33pm EDT

* IPO set for H2 this year -sources

* Grohe seen valued at over 2 bln eur

* Company was source of "locust" controversy in 2004

FRANKFURT, May 13 (Reuters) - Investor TPG Capital and the private equity arm of Credit Suisse are speeding up preparations to divest Europe's biggest bathroom equipment maker Grohe, sources said.

They are pursuing a so-called dual track process that may result in an initial public offering (IPO) or sale to a competitor or other investor and may take place in the third or fourth quarter, two people familiar with the transaction said.

Credit Suisse, Goldman Sachs and Morgan Stanley are set to be mandated shortly as organisers of the flotation or sale, they said, adding Deutsche Bank, and UBS have also secured roles in the potential deal.

Grohe, its owners and the banks declined to comment.

Grohe, which last year posted sales of 1.4 billion euros ($1.8 billion) and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of 273 million euros in 2012, has an estimated global market share of about 8 percent.

It is likely to have an equity value of more than 2 billion euros in a flotation, industry sources said.

Peer Geberit has an enterprise value - equity value plus debt - of more than 14 times its projected EBITDA. At the same multiple, Grohe would be worth at least 3.8 billion euros.

TPG and Credit Suisse bought Grohe for 1.5 billion euros in 2004 from peer BC Partners, backed with 1.45 billion in debt, most of which was loaded onto Grohe, sparking controversy about private equity investors in Germany.

The head of the Social Democratic Party at the time dubbed private equity firms "locusts" that sucked the life out of targets before letting them go bust and moving on.

In a move to shift production to low-wage countries, TPG and Credit Suisse initiated job cuts at Grohe but carried out many fewer than the 3,000 redundancies originally planned, and kept the research and development divisions in Germany.

Grohe employs 9,000 staff, including 3,400 at newly acquired subsidiary Joyou.

If free float market capitalisation after an IPO exceeded 1 billion euros, Grohe could qualify for Germany's mid cap index , where it was listed before BC Partners took it private in 2000.

Grohe was founded in 1936 by Friedrich Grohe, the son of Hans Grohe, who 35 years earlier founded a company that is today called Hansgrohe and is one of Grohe's biggest competitors in bathroom fittings.