DEALTALK-Buyout firms may pre-empt Saint-Gobain unit IPO

(For more Reuters Dealtalks, click [DEALTALK/]

* Peers Owens, Rexam imply 4.4 bln euro value, UBS says

* Buyout firms regain cyclical appetite as funding recovers

* Apollo, Blackstone, CVC, TPG could be among suitors

* Saint-Gobain may call on BNP, JPMorgan, Merrill -sources

By Quentin Webb and Nina Sovich

LONDON/PARIS, Oct 14 (BestGrowthStock) – Private equity firms could
jump in ahead of a planned flotation of Saint Gobain’s (SGOB.PA: )
glass-bottle arm and seek a 4 billion euro-plus deal that would
be Europe’s largest post-crisis buyout.

Late on Wednesday, the world’s largest building materials
group outlined plans to list the unit, dubbed “Verallia”, in the
second quarter of next year at the earliest. [ID:nLDE69C27V]

Compagnie De Saint-Gobain SA is squarely focused on
supplying parts to build sustainable homes and has flagged the
unit, which churns out 25 billion bottles and jars a year, as
non-core since 2007.

Saint-Gobain talked solely of a listing, and is consulting
with unions about the project in the coming weeks. That might
limit its options to pick an alternative route, despite the
attractions of shedding 100 percent in one go.

But analysts and people familiar with the matter say major
buyout firms could propose a leveraged buyout (LBO) of over 4
billion euros ($5.6 billion) ahead of a listing.

That would be the biggest European LBO since KKR and Co
(KKR.N: ) led the $21 billion takeover of Alliance Boots [ABN.UL]
in 2007, Thomson Reuters data shows — one of private equity’s
last epic deals before the credit crisis hit.

The prospect of such a deal underscores a recovery in
private equity’s appetite to buy and sell companies in sectors
exposed to swings in the economy — aided by a big improvement
in the bank and bond funding available to back such takeovers.

OHIO RIVAL

Verallia ranks second only to Ohio-based Owens Illinois Inc
(OI.N: ) in producing glass bottles and jars.

Based on trading multiples for peers, Verallia could be
worth about 4.4 billion euros including debt, UBS analysts say.

Both Owens and Britain’s Rexam Plc (REX.L: ), the drinks can
No. 1, trade at about 6.5 times expected 2010 earnings before
interest, tax, depreciation and amortisation (EBITDA), UBS
reckons.

Credit Suisse puts an enterprise value of about 4 billion
euros on the business. Both Swiss banks say the planned IPO
could be used to flush out private equity or trade bidders,
attracted by the unit’s strong cashflows.

Saint-Gobain did not name any banks that would help it
prepare for a listing, but people familiar with the matter say
it has previously consulted JPMorgan, BNP Paribas and Bank of
America Merrill Lynch about options.

“JUNK” BONDS

Private equity firms that have the financial firepower and
packaging industry affinity to do such a deal include Apollo
Management LP [APOLO.UL], Blackstone Group LP (BX.N: ), CVC
[CVC.UL] and TPG [TPG.UL], people familiar with the matter say.

Some have done preparatory work in recent months, the
sources added. The private equity firms either declined to
comment or could not be reached for comment by Reuters.

The financial crisis all but curtailed dealmaking in
cyclical sectors but private equity firms are starting to buy
and sell companies such as Spanish can-maker Mivisa and Dutch
chemicals distributor IMCD. [ID:nLDE68T1LB] [ID:nN06271802]

A rebound in acquisition financing has helped, with some
bankers now saying a 5 billion-euro deal in Europe is
achievable. [ID:nN23169075]

Bigger deals are likely to lean heavily on high-yield bonds,
rather than just loans. Doughty Hanson & Co [DOUHA.UL] recently
sold metal packaging firm Impress to Irish entrepreneur Paul
Coulson’s Ardagh Glass [ARDG.UL], in a 1.7 billion euro deal
that Ardagh is funding with “junk” bonds.
($1=.7110 Euro)
(Reporting by Quentin Webb in London and Nina Sovich in Paris;
additional reporting by Simon Meads in London and Gilles
Guillaume in Paris; editing by David Cowell)

DEALTALK-Buyout firms may pre-empt Saint-Gobain unit IPO