Graphite Capital In Separate Talks To Sell Micheldever, To Buy U-Pol

(Reuters) – British buyout firm Graphite Capital is in exclusive talks on two auto industry deals worth a combined $500 million, potentially selling one business and buying another, people familiar with the situation said.

Graphite is in talks to sell British tyre wholesaler and retailer Micheldever to Japanese trading house Marubeni (8002.T: Quote, Profile, Research, Stock Buzz), the European distributor of Yokohama tyres, for around 200 million pounds ($309 million), two sources said.

Graphite is separately in exclusive talks to buy back U-Pol, the car paint and body-filler company it sold to rival AAC Capital less than five years ago, for about 130 million pounds, sources said.

Micheldever operates 15 wholesale sites and says it is the UK’s largest independent tyre wholesaler and retailer with a 20 percent share of the market, selling about 6 million tyres a year. The company forecast sales of 283 million pounds in 2010.

Graphite, whose past successes include electronics retailer Maplin and the Wagamama noodle chain, bought Micheldever from its founder in 2006, installing a new management team as part of the 85 million pound deal.

A sale to Marubeni, whose interests stretch from power plants to footwear, would buck the rising trend of so-called secondary buyouts, whereby one buyout house buys a company from a rival private equity firm.

Micheldever did attract private equity bidders, but it suits a deep-pocketed buyer with capital to invest as the company operates in a fragmented sector with scope for consolidation and which could benefit from investment to grow its Protyre retail chain, sources said.

Canadian pension funds Ontario Teachers’ Pension Plan and OMERS had considered bids in the early stages, sources previously told Reuters. [ID:nLDE65F1TQ]

Graphite sold U-Pol to AAC, then ABN AMRO’s private equity business, in 2006 for 75 million pounds, more than trebling its initial equity investment.

KPMG is advising the sellers on both deals.

AAC, Graphite and Marubeni declined to comment. KPMG was not immediately available.

By Simon Meads

(Editing by Will Waterman and David Holmes) ($1=.6511 Pound)