FRANKFURT Germany's Siemens has received tentative offers for the postal automation and baggage-handling division being sold in its effort to streamline operations and shed non-core assets, two sources familiar with the transaction said.
The postal operation, which counts the U.S. Postal Service and Deutsche Post among its customers, has benefited from the growing number of consumers shifting to internet shopping.
The baggage-handling side of the business makes both software to track luggage and mechanical equipment such as conveyor belts. It has installed more than 300 baggage-handling systems at airports all over the world.
German private equity firm Triton and U.S. investment groups Gores and Platinum are among those that have handed in bids for the 300 million euro ($386 million) division by the July deadline, the sources said on condition of anonymity.
Siemens, Triton and Citigroup, which is running the auction, declined to comment. Neither Gores nor Platinum were immediately available for comment.
The postal automation and baggage-handling business has annual revenues of about 800 million euros and earnings before interest, tax, depreciation and amortization of about 60 million euros.
"Interest in the asset has been very robust, although it is not an easy asset," one of the sources said.
One issue for prospective buyers is to line up banks that can fund the debt guarantees that suppliers of the industry's large machinery generally have to provide. These are to cover pre-installation performance guarantees and warranties once the machines have started operating.
The strong credit rating enjoyed by Siemens has meant that the engineering group has provided these at very low cost, said another source familiar with the deal.
A potential buyer would probably have to write a large equity check for the postal automation and baggage-handling division - without using large amounts of debt to finance the acquisition - to convince banks to supply the guarantees.
"The transaction could end up in something like a 100 million euros all-equity deal," the source said, adding that the enterprise value of the business is estimated to be about 300 million euros.
The Siemens unit competes with U.S. group Pitney Bowes, Northrop Grumman's French subsidiary Solystic, Japan's NEC, Dutch group Vanderlande and Germany's Beumer.
(Additional reporting by Maria Sheahan; Editing by David Goodman)