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Goldman and PAI Partners ask Morgan Stanley to sell Xella, say sources: Reuters

Private equity group PAI Partners and Goldman Sachs‘ investment arm have mandated Morgan Stanley and Goldman Sachs to sell building materials maker Xella after failing to float it last year, people familiar with the matter said.

An auction or a second attempt to float the German company is expected to fetch more than 1.8 billion euros ($2 billion) and to start in September, they said on Wednesday.

Xella posted revenues of 1.3 billion euros and core earnings of 243 million in the twelve months to the end of March 2016, according to its latest financial presentation.

Listed sector peers such as Wienerberger, Braas Monier, Etex or H+H trade at roughly 5 times their expected core earnings.

One source familiar with the matter said Xella’s core earnings, or adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), are expected to reach 260 million euros this year and the company may be valued at more than 7 times that.

Xella this month gave no specific EBITDA forecast and only said that it expects its efficiency program to reap fruit while it sees an upward trend in the construction industry continuing in its core markets where Germany, the Netherlands and Poland have been drivers over the last 2-3 years.

In last year’s initial public offering (IPO) attempt the company had targeted an enterprise value of 2.5 billion euros, sources said at the time.

Xella has since increased its net debt to 744 million euros as of March 2016 from 568 million a year earlier.

Goldman Sachs, Morgan Stanley declined to comment, while PAI was not immediately available for comment.

The company will be marketed to other large buyout groups with an interest in the sector, the sources said, noting that other building materials makers are unlikely to submit offers.

Building materials brands such as Ytong, Hebel and Silka account for roughly two thirds of the business of the Duisburg, Germany-based group, while 20 percent of its sales come from higher-margin lime and limestone businesses, which account for almost a third of the group’s earnings.

This month Moody’s lifted its outlook on Xella to stable from negative citing the expected improvement in 2016 performance.