Deals and IPOs

Big Anglo-French Buyout Planned

Andrew Harrer | Bloomberg | Getty Images

A British-based private equity consortium is preparing a bid of 3.5 billion euros for French catering company Elior in what would be the biggest buyout in continental Europe since Lehman Brothers collapsed in 2008.

CVC Capital Partners and BC Partners have teamed up to launch a buyout of Elior, underlining how confidence is returning to Europe's private equity sector.

Their bid would be for the whole of Elior, valuing the company including its net debt at 3.5 billion euros – not just the 2 billion euros catering unit its private equity owner Charterhouse had initially planned to offload, people with knowledge of the matter said.

The move partly highlights how recovering debt markets and the easing of the eurozone debt crisis have triggered an improvement in sentiment among Europe's leveraged buyout groups. Buyout groups are now able to finance larger deals and are showing stronger appetite to put their investors' capital to work.

It also shows that buyout groups are finding it difficult to sell companies by breaking them up into pieces, partly due to the lack of a liquid market for private equity-backed initial public offerings in Europe.

Charterhouse, headquartered in London, would prefer a straight sale of Elior, one of Europe's largest contracted food-service providers, people with knowledge of the matter said.

However, the seller and its advisers want to take their time to persuade other bidders to submit offers for the company before launching a formal auction, the people said. They are working with banks on a debt package that would exceed €2bn, they said.

Elior was founded in 1991 by Francis Markus and Robert Zolade. Mr Zolade still owns 25 percent of the company.

Charterhouse, headed by Gordon Bonnyman and Lionel Giacomotto, took Elior private in 2006 in a transaction valuing the company's equity and debt at €2.5bn.

The London-based buyout group is also selling German metering company Ista, worth more than €3bn, and French perfume retailer Nocibe, as it seeks to return cash to investors before its next fundraising.

Elior made €362m of earnings before interest, tax, depreciation and amortisation in the year to September 30 on revenues of €4.2bn.

While Elior looks likely to be another "pass the parcel" deal – whereby a company is sold from one private equity owner to another – it would bring some life back to a particularly subdued French private equity market. Buyout activity in France declined last year as the country's business leaders weighed the impact of the newly elected socialist president Franois Hollande's planned tax reforms.

Private equity deals in France more than halved to 6.2 billion euros in 2012, from 15 billion euros the previous year, according to data compiled by the Centre for Management Buyout Research. That compares with a 21 percent decline to 49.5 billion euros across Europe in the same period.