UPDATE 2-Germany's GEA sells heat exchangers business for $1.8 bln

Wed Apr 16, 2014 8:35am EDT

* Triton to pay 1 bln euros and meet pension obligations

* GEA says proceeds will fund acquisitions

* Shares up 6.5 pct (Adds financing, analyst, share price)

By Maria Sheahan

FRANKFURT, April 16 (Reuters) - German industrial machinery and engineering company GEA Group has struck a deal to sell its heat exchangers division for about 1.3 billion euros ($1.8 billion) to concentrate on its burgeoning food equipment business.

GEA said it will use proceeds from the sale to private equity investor Triton for acquisitions to sharpen its focus on food-related operations, which will now account for more than 70 percent of group revenues.

Triton is paying about 1 billion euros and assuming pension obligations at the heat exchangers (HX) business, GEA said, sending the group's shares up 6.5 percent by 1222 GMT.

The deal values the business at the upper end of market expectations and analysts said that growth prospects in the food industry painted a bright picture for GEA's future.

"The food-related business units have clearly outgrown the HX segment in the past few years and this trend looks set to continue," Hauck & Aufhaeuser analyst Henning Breiter said in a note to clients.

The company's businesses making food processing machines and industrial refrigeration equipment were the group's fastest-growing last year, while revenue at the HX operation shrank by about 7 percent.

GEA had put the HX business up for sale late last year, saying it offered limited synergies with its other operations, which make products such as industrial meat grinders and automatic feeding systems for the dairy industry.

BOOK GAIN

The deal with Triton values the HX business, which makes equipment for a wide range of applications from air conditioning to cooling towers, at between 11 and 12 times annual operating profit, according to analysts.

HSBC analysts put the book value of the business at about 973 million euros, meaning the book gain would come to as much as 327 million euros.

GEA said it expects the deal to close by the end of the year.

Triton's acquisition will be backed with debt financing totalling about 1.25 billion euros from banks expected to include Deutsche Bank, Commerzbank, ING , RBS and UniCredit, banking sources said.

The financing will comprise a large undrawn component of around 400 million euros of guarantee facilities and about 70 million euros of revolving credit.

The rest of the financing will comprise between 750 million euros and 800 million euros of high-yield bonds, with the total debt financing amounting to about five times the HX business's annual EBITDA of about 150 million euros.

Frankfurt-based Triton beat out a rival consortium of buyout group EQT and industrial services group Bilfinger, adding to the acquisition this month of Alstom's HX business for 730 million euros. ($1 = 0.7234 Euros) (Additional reporting by Claire Ruckin and Anneli Palmen; Editing by Miral Fahmy and David Goodman)