Private equity firms are competing to buy Dutch-based testing company Element Materials Technology from owner 3i (III.L), in a deal that could test the dynamics between the US and European debt markets, banking sources said.
PAI Partners and Bridgepoint are among a long list of potential bidders, a banking source said, with a bid deadline of December 16.
Rothschild was appointed earlier this year to pursue a sale of the business by 3i. The sale process is being run in the US and Europe.
3i, Bridgepoint, PAI Partners and Rothschild declined to comment.
Element, which specializes in materials and product testing for the aerospace, oil and gas, transportation and industrial sectors, is headquartered in Europe but generates most of its revenues in US dollars.
With pro-forma Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) of $74.4m and leverage of around six times, debt packages could total around $450m.
Element could tap either the US or European markets for financing, although it remains likely to choose a US dollar structure, two bankers said.
One debt advisor said that dollar-denominated debt could be raised in Europe, which is currently more stable than the volatile US market, through hedging and different currency tranches.
“For a really good credit with high leverage and putting in second lien debt, it would surprise me if it was financed out of the US,” they said.
The US leveraged loan market has been in turmoil since the US$5.6bn financing backing Carlyle’s buyout of software firm Veritas was pulled in November due to lack of investor appetite.
Several cross-border deals – including Swiss air cargo handler Swissport, US trailer manufacturer Dexter Axle and Belgian chemicals distributor Azelis – have revised financing packages to include larger euro elements as US market appetite dwindles.
Element has some exposure to the struggling commodity sector, one banker said, with several clients in the troubled oil and gas sector.
However, any syndication would not launch until at least January and the company is rated B2 by Moody’s.
3i purchased a majority stake in Element in December 2010 and has since grown thecompany through seven buy and build acquisitions in Europe and the US, according to 3i’s website.
In 2015 Element acquired TRaC Global, an aerospace testing specialist in Europe and Environ Laboratories, which is based in Minneapolis.