UPDATE 2-Michelin to buy Sascar, tapping growth in Brazil truck market

Mon Jun 9, 2014 12:31pm EDT

(Recasts, add details, financial advisers, GP Investments' return, share performance)

By Alexandre Boksenbaum-Granier and Guillermo Parra-Bernal

PARIS/SAO PAULO, June 9 (Reuters) - Michelin & Cie agreed on Monday to buy Brazilian digital truck-fleet management company Sascar Participações SA for 440 million euros ($600 million) to tap into robust growth in the South American nation's truck industry.

Michelin will assume Sascar's debt of about 80 million euros, the French company said in a presentation. The deal is subject to the approval of Brazilian authorities.

The agreement comes three years after GP Investments Ltd, the largest Latin American private-equity firm, took control of Sascar, betting that car insurers, logistics firms and security risk managers would boost demand for monitoring services.

Sascar earned 280 million reais ($126 million) in revenue last year, with earnings before interest, taxes, depreciation and amortization accounting for 37 percent of that and sales up 16 percent.

Michelin, Europe's largest tire maker is expanding across emerging markets, where demand for vehicles and auto-related services should rise in coming years.

"Michelin will benefit from the client base and human, technical and marketing skills built up by Sascar in the fast-growing telematics market for professional truck fleets," Jean-Dominique Senard, Michelin's chief executive officer, said in a statement.

Sascar is Brazil's No. 1 fleet management firm with a 23 percent market share. Fleet management and monitoring is a fast-growing market in Brazil, where only 4 percent of vehicles are tracked. The industry is expected to grow an annual 15 percent over the next four years.

Sao Paulo-based Sascar has 870 employees and manages 33,000 fleets totalling 190,000 trucks.

In a separate statement, GP Investments said the sale of its 46 percent stake in Sascar earned it $260 million. The Sascar deal will generate a return for GP Investments equal to 2.6 times the amount originally invested, and an internal rate of return of 33 percent measured in U.S. dollars.

Sascar's total enterprise value was estimated at 520 million euros. That means the company was priced at about 11 times projected operational earnings this year, compared with 14 to 19 times for similar companies.

GP Investments hired Itaú BBA and Barclays Plc , the firm said in a statement. Citigroup Inc's investment-banking unit advised Michelin on the deal.

Shares of Michelin fell 0.7 percent to 91.84 euros on Monday. Units of Hamilton, Bermuda-based GP Investments traded in São Paulo soared 11.2 percent to 4.78 reais.

($1 = 0.7345 euros)

($1 = 2.22 Brazilian reais) (Additional reporting by Andrew Callus in Paris and Sophie Sassard in New York; Editing by Blaise Robinson and Bernadette Baum)

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