Exclusive: Fittings maker Grohe attracts bid interest from rivals - sources

FRANKFURT Thu Jul 11, 2013 1:10pm EDT

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FRANKFURT (Reuters) - German bathroom fixtures maker Grohe GROH.UL has attracted bidding interest from several rivals, which have been asked to submit tentative offers by the end of next week, three people familiar with the process told Reuters.

Grohe's owners, investor TPG Capital TPG.UL and the private equity arm of Credit Suisse (CSGN.VX), are running a so-called dual track process that may alternatively result in a stock market listing of Europe's biggest bathroom equipment maker in the autumn.

The potential sale to rivals, which could value Grohe at up to 4 billion euros ($5 billion), could become the largest European deal involving private equity investors this year, ahead of BC Partners' BCPRT.UL acquisition of German publisher Springer Science SPSBM.UL and CVC's CVC.UL purchase of German energy-metering firm Ista CHCAPI.UL.

Grohe's Swiss peer Geberit (GEBN.VX) as well as Thailand's Siam Cement (SCC.BK) are keen to snap up the company, two of the sources said. U.S.-based Fortune Brands (FBHS.N) has also expressed interest in Grohe in the past, but has not been in active pursuit lately, the third source said.

Private equity firms buy companies, try to boost their profitability by cutting costs, merging them with rivals or shaking up operations, and then sell them on in the hope of making a return.

While Grohe's owners have been sounding out buyer interest for the last two years, they earlier this year launched initial public offering (IPO) preparations to try to extract the most value possible from the asset.

Grohe, which has an estimated global market share of about 8 percent, posted sales of 1.4 billion euros and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of 273 million euros last year. It has not provided specific 2013 earnings guidance, which is usually used as a starting point to compare the enterprise value of companies.

STRATEGIC OPTIONS

Grohe's owners are hoping for a valuation similar to the 14.4 times EBITDA that Geberit trades at, the sources said. Bidders, on the other hand, are likely to offer valuations more in line with the 10.3 times EBITDA that French peer Legrand (LEGD.PA) trades at.

"Grohe continues to evaluate all strategic options," a spokesman for the company said.

TPG and Credit Suisse, as well as Goldman Sachs (GS.N), which is working with Credit Suisse to organise the sale, declined to comment. Geberit and Siam Cement were not immediately available for comment, while Fortune also declined to comment.

TPG and Credit Suisse bought Grohe for 1.5 billion euros in 2004 from BC Partners, backed with 1.45 billion in debt, most of which was loaded on to Grohe, leading to criticism of private equity investors in Germany.

The head of the center-left 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 began job cuts at Grohe but carried out many fewer than the 3,000 redundancies originally planned. It kept keeping research and development in Germany.

($1 = 0.7778 euros)

(Reporting by Arno Schuetze, Alexander Huebner and Denny Thomas; Editing by Alex Smith and Pravin Char)

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