GEA to pick final contenders for heat exchangers unit - sources

FRANKFURT Fri Feb 21, 2014 9:23am EST

FRANKFURT Feb 21 (Reuters) - German industrial machinery and process engineering group GEA will shortly narrow the list of contenders for its heat exchangers division to about three bidders, possibly including the same groups eyeing rival Alstom's heat exchanger unit, two people familiar with both deals said.

Suitors for GEA's unit including KKR, EQT, Bain, Apollo, Onex and Triton are planning to hand in confirmatory bids of about 1.2 billion euros ($1.5 billion) - or seven times operating earnings - by a March 7 deadline, the sources said.

Those picked for the last round will then be asked to submit final offers by the end of April, they added.

The Heat Exchangers division, GEA's second largest business by revenue, makes equipment for a wide range of applications from air conditioning to cooling towers.

But GEA last year described the business as non-core and having limited synergies with its five other divisions - Food Solutions, Farm Technologies, Mechanical Equipment, Process Engineering and Refrigeration Technologies.

The potential buyers of the unit are mainly interested in the air conditioning and industrial cooling applications, but less so in the power plant-related sub-unit.

Therefore, some have already engaged in conversations over a subsequent sale of that business to Paharpur Cooling Towers, the sources said. The India-based group had shown interest in a similar unit that U.S. peer SPX unsuccessfully tried to sell in 2012.

Some of the same buyout groups are also eyeing an acquisition of the heat exchanger unit of French turbine and train maker Alstom, although none are planning to combine the units.

Final bids for that business - which comprises the Air Preheaters unit, making products used by boiler companies and utilities, as well as the Gas-Gas Heater unit that makes devices salvaging heat from the flue gas from power plants before it exits through the stack - are due on March 24.

Private equity firms such as Bain, CVC, Rhone, Triton, Onex and Astorg, among others, are likely to hand in bids valuing the firm at 550-600 million euros, two people familiar with the transaction said.

Bankers are preparing debt packages of about 450 million euros or 6 times its 75 million euros in earnings before interest, taxes, depreciation and amortization, one of the sources said.

Alstom, which makes high-speed TGV trains, announced sweeping job cuts in November and said it would sell up to 2 billion euros of assets to raise cash after a tough first half of the year.

A GEA spokesman said that the group expected to clinch a deal on its heat exchangers unit this summer.

An Alstom spokeswoman said the group intended to dispose of non-core assets, declining to comment on specific transactions.

Bain, KKR, EQT, CVC, Astorg and Triton declined to comment, while Onex, Apollo, Rhone and Paharpur Cooling Towers were not immediately available for comment.

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