European private equity firm Apax has hired JP Morgan and UBS to explore a stock market listing or sale of its Italian auto-parts distributor Rhiag, six sources familiar with the matter said on Wednesday.
The London-based buyout firm has invested in Rhiag for less than two years and hopes to cash out for as much as 1 billion euros ($1.10 billion), the sources said.
Private equity firms typically invest for three to five years. But Apax, which bought the company in October 2013, wants to take advantage of high industry valuations and growing investors’ appetite for mergers and acquisitions (M&A) deals in Italy to finalise an exit, the sources said.
A dual-track process to explore an initial public offering (IPO) or an outright sale is expected to start after the summer, the sources said, asking not to be named because the matter is private.
Apax, Rhiag, JP Morgan and UBS declined to comment.
Headquartered in Pero, close to Milan, Rhiag was sold to Apax in October 2013 for an undisclosed amount.
It could be valued at roughly 11 times its earnings before interest, taxes, depreciation and amortization (EBITDA) of around 90 million euros, two of the sources said.
Another source said that Apax would sell for no less than 10 times Rhiag’s core earnings and it was primarily looking at a stock market listing in Milan.
Rhiag competes with Mekonomen in the Nordics and Inter Cars in Poland, one of the sources said.
Swedish spare-part chain Mekonomen trades at 9.6 times its EBITDA while other industry peers trade at an average 9.9 times their EBITDA, according to Thomson Reuters data.
The decision to put Rhiag on the block comes amid a surge in M&A activity in Italy.
Bain Capital and Advent International recently trumped a series of heavyweight international funds to buy Italian banking services provider Istituto Centrale Banche Popolari (ICBPI).
The ICBPI deal, worth 2.15 billion euros, contributed to a significant rise in Italian M&A activity with $25.5 billion worth of deals recorded in the first six months of the year, up 240 percent from the same period last year, according to Thomson Reuters data.
PRIVATE EQUITY CAPITAL
Rhiag has a long history of private equity ownership as buyout funds have consistently injected capital for the past 17 years.
It was first sold to London-based buyout fund CVC in 1998 and later acquired by Alpha Associates in 2007.
Alpha tried to list the business in 2011 and subsequently sold it to Apax.
Apax backed its acquisition of Rhiag with a 415 million euro high-yield bond issue in October 2013, leaving the company with five times net debt to EBITDA. The bond was increased by a further 50 million euros a year later.
The debt has performed well in the secondary market since then.
Rhiag could still appeal to international buyout funds as it offers growth prospects across Eastern European markets, one of the sources said, adding that some industry players may also consider submitting a bid.
Founded in 1962, Rhiag operates as a distributor of replacement automotive components to after-market wholesalers in 10 European countries including the Czech Republic, Slovakia, Poland, Romania and Ukraine. ($1 = 0.9120 euros)