PE Firms Plan Auto Product Exits

LONDON (Reuters) – Buyout firms Graphite Capital and AAC Capital have kicked off the sales of two automotive products companies, hoping to capitalise on rivals’ appetite for second-hand deals, sources familiar with the processes said.

Graphite is hoping tyre wholesaler and retailer Micheldever Tyre Services will fetch around 200 million pounds ($300 million), while AAC would like to get 120 million to 130 million pounds for car body filler company U-Pol, sources said.

KPMG has been drafted in to sell both companies, which are expected to see interest from mid-market private equity funds and increasingly active Canadian pension funds. 

Graphite, AAC and KPMG declined to comment.

Teachers’ Private Capital, the private equity arm of Ontario Teachers’ Pension Plan, is among the parties considering a bid for Micheldever, sources familiar with the situation said.

The pension fund hit the headlines in March by agreeing to buy British lottery operator Camelot, fending off a bid from buyout house CVC. In January, the private equity arm acquired special schools operator Acorn Care and Education Limited.

Rival Canadian pension fund OMERS is also eyeing the business, one of the sources said.

Unlike a traditional buyout firm, which is constrained by the size and 10-year lifespan of the typical private equity fund, pension funds can invest from much deeper pools of capital and hold companies for indefinite periods.

Micheldever operates in a fragmented sector, providing scope for consolidation and suiting a deep-pocketed buyer with a long investment period, sources said. But they were sceptical whether Graphite would meet its 200 million pound target.

The business may also appeal to a trade buyer such as Halfords (HFD.L), one of the sources said.

U-Pol is attracting interest from private equity houses, including Graphite, which sold the business in early 2006 to AAC, then ABN AMRO’s private equity business.

The company could also appeal to trade players operating in the paints and chemicals sectors, such as Akzo Nobel (AKZO.AS) and DuPont (DD.N), one of the sources said.

BY Simon Meads
(Editing by Will Waterman) ($1=.6680 Pound)