Candover backs out of Auto Trader bidding

Auto Trader, a car sales business owned by the UK-based Guardian Media Group, is expected to be valued at up to £1.3 billion when final bids are submitted tomorrow. The price has reportedly frightened off one interested party.

The rising price tag of UK-based Auto Trader, a £1.3 billion (€1.9 billion; $2.5 billion) valued car advertising business owned by the Guardian Media Group, has reportedly caused at least one interested private equity firm to withdraw from the bidding.

UK buyout firm Candover has pulled out of the auction after deciding the business had become too expensive, according to the London-based Times newspaper.

Final bids in the auction, which is being run by Merrill Lynch, are expected tomorrow. Early estimates suggest the business could be valued at up to £1.3 billion, a multiple of about eleven times its 2006 earnings of £119.5 million.

However several other buyout firms reportedly remain in the running, including CVC Capital Partners and The Blackstone Group. Apax Partners, which has been buying a number of businesses in the media sector in recent months, is also thought to have submitted a bid.

Guardian Media Group, the owner of the Guardian and Observer newspapers, is expected to raise about £500 million by selling a minority stake in Auto Trader, the UK’s leading car sales magazine and website and the GMG’s prize asset. It will use this money to pay down its existing debts, while retaining control of the business to support its other newspaper interests.
The successful bidder would not be the first private equity firm to own a stake in Auto Trader. BC Partners owned a 52 percent stake until 2004, when it was bought out by GMG in a deal that valued the business at £1.1 billion.

However, GMG had originally considered a flotation for the group, and may still revert to this plan if it fails to secure a suitable offer.