By Megan Davies and Michael Flaherty
NEW YORK (Reuters) - Private equity firm Bain Capital sees investment opportunities in European auto part makers and specialty chemical companies, said the firm's managing director and industrials expert Paul Edgerley on Thursday.
"We've looked at automotive parts somewhat more in Europe than North America," Edgerley said, adding that the U.S. industry is more complex thanks to the struggles of the major domestic auto makers.
Robert Bosch GmbH ROBG.UL, Continental AG (CONG.DE: Quote, Profile, Research, Stock Buzz) and Valeo (VLOF.PA: Quote, Profile, Research, Stock Buzz) are among the largest European auto parts makers.
Edgerley, who has orchestrated several major industrial and distribution deals for Bain, also pointed to other sectors he liked.
"I think there are still some opportunities in chemicals. Like a lot of industrial businesses, chemicals have their cycles to them," he said, speaking at the Reuters Hedge Funds and Private Equity Summit in New York. "You have to be disciplined in thinking about when is a good time to buy companies in the chemicals sector. I think the commodities side is tough, given where they are in the cycle; but I think on the specialty side there are some interesting opportunities."
Edgerley declined to identify specific companies the firm is pursuing.
Commodity chemical companies include Dow Chemical Co. (DOW.N: Quote, Profile, Research, Stock Buzz) and Huntsman Corp. (HUN.N: Quote, Profile, Research, Stock Buzz), which manufacture chemicals in bulk at high volumes and typically low margins. Specialty chemical companies include DuPont Co. (DD.N: Quote, Profile, Research, Stock Buzz) and Albemarle Corp. (ALB.N: Quote, Profile, Research, Stock Buzz), which make chemicals for specialized uses in smaller volumes with typically higher margins.
Boston-based Bain Capital is among the largest private equity firms globally, currently investing a roughly $9 billion buyout fund. Edgerley, who joined Bain in 1988, has been behind investments in such companies as chemicals company Brenntag, Sensata Technologies, a carve-out from Texas Instruments Inc. (TXN.N: Quote, Profile, Research, Stock Buzz); and MEI Conlux, a carve-out from Mars Inc.
Edgerley said Bain has also looked at railroads, which were recently in the spotlight after Warren Buffett's Berkshire Hathaway Inc. (BRKa.N: Quote, Profile, Research, Stock Buzz)(BRKb.N: Quote, Profile, Research, Stock Buzz) raised its stake in Burlington Northern Santa Fe Corp. (BNI.N: Quote, Profile, Research, Stock Buzz) and two other rail companies.
"We have looked at railroads a series of times, and I think they can be interesting long-term investments; but there are only a handful of companies in that area, so it's probably not as big a part of what we focus on," he said.
Distribution deals are attractive, Edgerley noted, because the industries are typically fragmented and can be built upon through acquisitions to grow scale and profits.
(For more on the Reuters Hedge Funds and Private Equity Summit, see ID:nN10168454
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