FRANKFURT Private equity groups Charterhouse CHCAP.UL and CVC CVC.UL have hired Deutsche Bank (DBKGn.DE) and Goldman Sachs (GS.N) to sell energy-metering firm Ista CHCAPI.UL, two people close to the transaction said.
The sale is set to become one of the biggest private equity transactions in Germany next year with a price tag of up to about 3 billion euros ($3.9 billion), they told Reuters.
Information packages will go out early next year and tentative bids were expected in the first quarter, the sources said on Wednesday.
While 2012 has been a slow year for private equity sales, leading to a backlog of deals, a flurry is expected early next year as owners also prepare the sale of forklift-truck maker Kion, publisher Springer Science and ferry group Scandlines.
Potential Ista bidders such as private equity investors Bain, Blackstone (BX.N), Hellman & Friedman and KKR (KKR.N) are starting work on the topic, sources close to the investors said, adding that bidders were unlikely to match the asking price.
"Super asset - super expensive", the head of one big private equity group said, adding Ista's management team was doing an excellent job and growth perspectives looked strong given new energy market rules.
Charterhouse bought Ista at the height of the buy-out boom in 2007 for 2.4 billion euros from CVC, backed with 2.1 billion debt. CVC later bought back 24 percent.
Ista's current debt of 1.8 billion euros is 6.2 times its expected 290 million euros earnings before interest, taxes, depreciation and amortization (EBITDA) for 2012.
Although Ista chief executive Walter Schmidt said in a recent interview his firm was "fit for an IPO", an initial public offering is not the owners' preferred option, sources close to them said.
"In my eyes, Ista is over-leveraged for an IPO," an equity capital markets banker said, adding refinancing risks were regarded as high from any debt multiple above 3 times EBITDA.
To back any buyout by an investor, lenders are working on debt packages of around 2 billion euros, bankers have said.
Ista as well as peers such as Macquarie-owned Techem TECEN.UL were expected to get a boost from a European Union directive requiring companies charge customers only for energy they actually consume. That is so far the case only in a few European countries such as Britain, Denmark and Germany.
"The Energy Efficiency Directive will, for sure, give our business a push," a spokesman for Ista said, declining to be more specific or to comment on the sales process.
The banks and potential bidders also declined to comment.
Ista, which has energy meters installed 11 million flats and commercial sites, last year posted sales of 700 million euros and employed 4,600 staff in 25 countries.
(Additional reporting by Claire Ruckin and Isabell Witt; Editing by Dan Lalor)