Apax, EQT Prepare $1.66 Billion Offer for Takko

Private equity firms Apax Partners and EQT are each preparing to offer 1.25 billion euros ($1.66 billion) for German discount clothing retailer Takko, Reuters reported. Takko is currently owned by buyout shop Advent International. The price of the offer is roughly 10 times earnings before interest, tax, depreciation and amortisation, Reuters said. Rival private equity firms TPG Capital and PAI were previously in the running for Takko, but dropped out, Reuters said.

(Reuters) – Apax and EQT are each preparing to offer rival buyout firm Advent International about 1.25 billion euros ($1.66 billion) for German discount fashion retailer Takko, people familiar with the process said.

It is the latest in a string of competitive auctions for private equity-owned companies this year and another potential secondary buyout — the practice of private equity firms acquiring each others’ portfolio companies.

Private equity firms are looking to deploy billions of dollars raised in the buyout boom before the credit crunch hit.

Apax [APAX.UL] and EQT’s bids, due on Friday, will match the valuation Advent places on the business. The price equates to about 10 times earnings before interest, tax, depreciation and amortisation (EBITDA), a typical valuation for such retailers, bankers had previously told Reuters.

A private equity pairing of TPG [TPG.UL] and PAI entered the second round of bidding but pulled out, people familiar with the process said.

All the private equity firms involved declined to comment.

Some of the people said an unnamed private equity firm was also eyeing the business, but it was unclear if it would submit a final bid, one of them said.

Advent must decide whether to sell the business it bought in 2007 from Permira for 770 million euros, or pursue an initial public offering (IPO).

If it decided an IPO offers better returns, a listing would be likely next spring, one of the people said.

A growing number of price-conscious Germans have been turning to discount clothing stores.

Takko, one of the country’s largest and fastest-growing discount chains, posted sales of 900 million euros in the year to end-April. An estimated 25 percent of German adults have purchased its products in the last year, says Advent’s website.

($1=.7513 Euro)

By Simon Meads and Philipp Halstrick
(Editing by David Hulmes)