(Reuters) – Several investor groups are readying bids for German motorway service station group Tank & Rast, in a deal worth up to 3.5 billion euros ($3.8 billion), sources familiar with the transaction said.
Tank & Rast is seen as carrying more risk than assets like gas grids or telecoms towers but offering a higher return, making it potentially appealing to pension funds and insurers who are focusing on infrastructure investments to pocket higher, but stable, returns than from government bonds, the sources said.
A consortium of Allianz, Munich Re (MEAG), sovereign wealth fund Abu Dhabi Investment Authority (ADIA) and Borealis, part of pension fund OMERS, aims to hand in an offer by a mid- to end-April deadline, the people said.
Canadian pension funds PSP and Ontario Teachers (OTPP) as well as Singapore sovereign wealth fund GIC are working on a joint offer, they added. The infrastructure arm of Australia’s bank Macquarie is also expected to express interest.
Terra Firma, run by financier Guy Hands, has tasked Deutsche Bank and JP Morgan to explore options for the business, also including a stock market flotation, although this path is not being actively looked into, the sources said.
The seller is hoping to fetch a valuation of up to 15 times core earnings (EBITDA) of around 235 million euros, roughly the multiple that a co-investor paid for its stake, in a deal potentially worth between 3.2 and 3.5 billion euros.
While the equity part of the investment may be more than 1.2 billion euros, bankers are working on debt packages of 2.1 billion euros, including 200 million in undrawn debt.
The leverage of around 8 times debt to EBITDA would be the highest ratio for any European buyout since the financial crisis.
“Tank & Rast benefits from long leases and reliable cashflows and is perceived by many lenders as a very stable credit to invest in,” a banker said.
Terra Firma bought the group, which operates 350 gas stations and 390 service stations, for 1.1 billion euros in 2004. Last year T&R completed a refinancing to leave it with debt at around 9 times EBITDA, or 6 times if only senior debt is counted.
In 2007, it sold 50 percent to Deutsche Asset & Wealth Management, which together with dividend payouts already means Terra Firma has made money on its investment.
Deutsche is also offering to sell its holding and will not bid for the remaining stake, sources said.
Listed peers like Italian Autogrill, Sodexo , Elior and Compass Group trade at an average of 9 times expected earnings.
ADIA, PSP, OTPP and GIC were not immediately available. Others named declined comment.