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Four funds vie for $400 million luxury paintmaker Farrow & Ball, say sources-Reuters

(Reuters) – American buyout firms Carlyle (CG.O) and Bain Capital are among a group of four private equity funds preparing second-round bids for British luxury paintmaker Farrow & Ball, several sources familiar with the situation said.

The others bidders are Gulf Investment firm Investcorp and Ares Private Equity, part of U.S-based Ares Management (ARES.N), the sources said on condition of anonymity because the process is confidential.

Farrow & Ball, which is advised by Rothschild, could be valued at about 250 million pounds ($401 million), representing a multiple of 11 times its pro forma earnings before interest, tax, depreciation and amortization (EBITDA) of 23 million pounds, the sources said.

Its owner European Capital, a private equity and debt investment firm, aims to have binding offers in by the end of November in an attempt to select a buyer before 2015.

However, the private equity bidders will first need to go through an interim round to table their offers ahead of a Nov. 3 deadline to reduce the shortlist further, the sources said.

“It has been structured as a three-part auction to maximize value,” one of the sources said, adding that a private equity buyout is the most likely option because of lukewarm interest from industry peers.

The Dorset-based paint company founded by chemists John Farrow and Richard Ball in the 1930s earns the bulk of its revenue in Britain, serving the high-end interiors market with its range of decorative wallpaper and such quaintly-named paint shades as Cat’s Paw, Mizzle and Charlotte’s Locks.

Sold to European Capital in 2006 as part of a management buyout valued at 80 million pounds, Farrow & Ball was put up for sale again this year in a process that initially attracted 15 preliminary offers, mainly from investment firms, one of the sources said.

Its management team is looking to expand internationally to offset declining sales in its home market, one of the sources said. It is already present in the United States, Germany and France, which rank as its key overseas markets.

Representatives at Farrow & Ball, European Capital and Rothschild declined to comment, as did Carlyle, Bain Capital, Investcorp and Ares.