French private equity investor Eurazeo and The Carlyle Group, the US private equity firm, have announced a partnership set up to fund a E400m buyout of Terreal, the French tiles and bricks manufacturer from parent-company Saint Gobain.
Carlyle was reported to have reached agreement with the Saint Gobain board in late July, beating off competition from a number of financial buyers including PAI Partners, CVC and Bain Capital. Eurazeo was eliminated from the bidding in the first round and joined the Carlyle bidding group at a later stage of the auction.
Carlyle and Eurazeo have agreed to pay E400m for the equity of Terreal and will assume debt totalling approximately E115m, giving the deal a total value of E515m. This is in line with earlier reports that put the transaction in the E500m to E550m bracket.
The acquisition will be financed through a combination of equity and debt financing. Carlyle is to acquire 60 per cent of the company and Eurazeo 40 per cent. The management team of Terreal, led by Hervé Gastinel, will also invest in the transaction.
Carlyle is thought to be investing from its second European buyout fund which is targeting E1bn.
Eurazeo is also currently fundraising for a E800m buyout fund, and is expected to hold a first close later this year.
Eurazeo and Carlyle previously linked up to bid for the Vivendi Universal Publishing business in 2002 and according to Carlyle partner Benoit Colas, the two firms share a similar investment philosophy. “We know Eurazeo very well. We’ve worked with them in previous transactions and we’re comfortable with the people there.”
Terreal is one of the largest clay tiles and bricks producers in Europe, with operations in France, Italy, Spain as well as in the US and Malaysia. Terreal had revenues of E328m in 2002 and 2,000 employees in 22 production sites.
“There is a considerable growth opportunity for Terreal, both in terms of its major markets of France, Italy and Spain and also the Benelux, Germany and Central Europe, where the market is more fragmented. There is a considerable opportunity to make further acquisitions,” said Colas, who said that the consortium would consider an IPO of Terreal if it is able to achieve critical mass.
Patrick Sayer, chief executive of Eurazeo said: “We are very pleased with this investment in Terreal, a leader in the Southern European clay tiles and bricks markets with strong resilient cash-flows. This is a sector we know well and where Eurazeo had successful investments in the past.” “In addition, this transaction in cooperation with Carlyle, highlights once more Eurazeo’s increasing presence in the French leveraged buyout market,” added Gilbert Saada, member of Eurazeo executive board.
Debt financing for the transaction will be provided by ING. The transaction is expected to close in early autumn.