February 7, 2011 / 11:34 AM / 7 years ago

DEALTALK-PAI clearout to set French firm up for new fund

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* PAI could sell FTE Automotive, Spie, Perstorp

* Selling Yoplait, CEP, Kwik Fit and Gruppo Coin -sources

* New fund could launch by end 2011 or 2012

* Investors encouraged by more openness, team decisions

By Simon Meads and Victoria Howley

LONDON, Feb 7 (Reuters) - French buyout firm PAI Partners is selling a clutch of companies, preparing the ground for a new fund and drawing a line under the management upheaval that nearly marked its demise.

PAI has four sales in process and bankers expect more this year, allowing the firm that ousted management 18 months ago and saw its fifth buyout fund cut in half, to return money to investors ahead of new fundraising that could come late in 2011.

German clutch maker FTE Automotive, which has rebounded strongly in 2010, is a likely disposal, people familiar with the company say. Along with some sales already underway, that could allow PAI to wrap up its third fund, raised 10 years ago.

Engineering firm Spie could also be sold, people say, and bankers pinpointed chemicals firm Perstorp last year as another candidate for sale. [ID:nLDE6671WI]

PAI successfully floated Danish ingredients maker Chr. Hansen (CHRH.CO) last year and is to consider bids for its investment in French dairy business Yoplait this week. [ID:nLDE7150H5]

It is in talks to sell Italian clothing chain Gruppo Coin to BC Partners [BCPRT.UL], and is selling mortgage broker CEP and tyre fitter Kwik Fit, people familiar with the processes say.

PAI declined to comment on specific deals, but its Chairman and CEO Lionel Zinsou told Reuters in a telephone interview the time was reasonably good for disposals.

“You have some sectors where you have very relevant financial sponsors and others where trade buyers are very relevant,” Zinsou said.

NEW DEALS, NEW FUND

In the spotlight as investors faced severe restrictions on their resources, the former private equity arm of BNP Paribas (BNPP.PA) saw investor commitments to its fifth fund cut in half to 2.7 billion euros ($3.67 billion) at the end of 2009.

The firm is spending money again, with four acquisitions sealed since June 2010 -- laboratory testing company Cerba, airport ground handler Swissport, airport retailer Nuance and Dutch lingerie firm Hunkemoeller.

Having committed about 60 percent of its fund to deals, investors expect PAI to come back for more money in 2012, or at the end of 2011, if it keeps up its current pace of investment.

And with more deals in Europe hitting the 1 billion euro mark, the firm could be hoping to justify a new fund close to 5 billion euros, more in line with the original fifth fund, one investor in the firm said.

    PAI said it did not currently have any definitive plans for fundraising.

    BACK ON TRACK

    It’s a far cry from 2009, when boom-time buyouts creaked under heavy debt burdens and PAI faced its darkest hours.

    The loss of roofing business Monier, bought in 2007 but then hit by recession and hobbled by its debt, was a turning point.

    Some investors and bankers believe frustrated lenders wanted to set an example for arrogant private equity firms, but those familiar with the firm say PAI could have held on to Monier if its management had been less aggressive.

    The ensuing melee saw Chairman and CEO Dominique Megret and senior partner Bertrand Meunier forced out.

    The promise of a less autocratic style of decision-making and more openness, relayed during 100 days of meetings with investors, turned the tide, just as investors were pulling the plug on British rival Candover (CDI.L).

    “Let’s be clear, they survived by the skin of their teeth. It was a near-death experience. People threw them a lifeline,” a banker familiar with the firm said.

    Investors are encouraged by the improvements and view PAI as more collegial and open under Zinsou, a former Rothschild banker, and his team.

    “I think they have found a way of increasing the relative power of the local deal teams; there really is shared power now. You have the evidence the team works because of the deals they have done,” said the investor.

    Megret and Meunier, reported to be considering a new private equity fund, did not respond to requests for comment. (Editing by Will Waterman) ($1=.7359 Euro)

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