Giannoni First-Round Bids Due This Week

LONDON (Reuters) – The result of first round bids in the auction of French heat exchanger maker Giannoni are expected this week, bankers close to the deal said on Thursday.

Opinions on the sale price are mixed as difficult macroeconomic conditions and a tough loan market environment continue to complicate valuations. Estimates range from more than 300 million euros to 450 million euros or more, bankers said.

“This is a very good business with high EBITDA margins and a good market position but as we move into a recession, there is potential for price pressure,” a leveraged banker working on the deal said.

Giannoni reported 2007 earnings before interest, tax, depreciation and amortisation (EBITDA) of approximately 50 million euros and is forecast to report EBITDA for the last 12 months of around 60 million euros, four bankers said.

Giannoni’s management could not immediately be reached for comment.

Trade buyers and 15 to 20 private equity buyers have shown interest in the auction. Conservative leverage levels mean that private equity firms may not be able to pay a full price even if they are able to secure financing from a smaller club of relationship banks, bankers said.

“Nobody knows where the market is at the moment, but talk puts leverage at maximum three times senior debt and four times total debt. There will be very few deals with higher leverage than that, even on a club-style basis,” a second leverage banker said.

Binding bids are not expected until January 2009, several bankers said, as banks’ credit committees remain wary of approving deals before the end of the year.

“I don’t see binding offers until the beginning of January. Even if it ends up being a club deal, people don’t want to sign this year,” another leveraged specialist said.

Giannoni, which started manufacturing heat exchangers after being created in 1993 by Joseph Le Mer and Rocco Giannoni, could benefit from a consumer migration to more energy-efficient boilers, the bankers said.

Giannoni’s owners are looking to sell in order to raise capital to allow the business to continue growing, two bankers said.

By Zaida Espana
(Editing by David Cowell)