UBS to lead TMD Friction IPO or sale -sources

By Alexander Huebner and Soyoung Kim

FRANKFURT/NEW YORK (Reuters) – TMD Friction , owned by financial investor Pamplona, has hired UBS AG to lead an initial public offering or sale of the company expected in the second half of this year, people familiar with the matter said Tuesday.

TMD Friction, which could be valued at roughly 600 million euros ($860 million), is expected to file initial paperwork for the planned IPO in Germany in coming months, while also entertaining buyout offers from potentially interested parties in what is known as a dual track process, these people said.

Pamplona Capital Management, a London-based private equity firm that bought TMD Friction out of bankruptcy in early 2009 for an undisclosed sum, has started talks with investment banks about a potential listing or sale of the company, sources told Reuters March 17.

TMD Friction manufactures disc brake pads and drum brake linings for passenger cars and commercial vehicles and friction materials for racing, rail and industrial applications.

The company is expected to have about 90 million euros in annual earnings before interest, tax, depreciation and amortization (EBITDA), one of the sources said. Auto parts suppliers are often sold for about 5 to 7 times forward EBITDA on average.

A TMD Friction spokesperson declined to comment on the hiring of a bank and said: “We are not in a hurry to do anything, we’re concentrating on our improved operating business.”

Representatives for UBS declined to comment.

The logical universe of buyers could include Honeywell International Inc, Federal-Mogul Corp, and ITT Corp, two of the people familiar with the matter said.

While the friction materials industry remains fragmented and could see more consolidation globally, it is unclear if any of the logical candidates would be interested in buying TMD Friction, these people said.

Federal-Mogul, a U.S. auto parts supplier controlled by billionaire investor Carl Icahn, has put itself on the auction block, while ITT is in the middle of splitting into three separate companies by the end of the year. Honeywell already has a big friction materials business.

TMD Friction, which has more than 4,500 employees worldwide, increased sales by more than 20 percent in 2010 to 637 million euros, driven by growth in China and Brazil.

(Reporting by Alexander Huebner, Arno Schuetze in Frankfurt and Soyoung Kim in New York; editing by Gunna Dickson)