TPG, Credit Suisse Plan to Exit Grohe

Private equity groups TPG Capital and Credit Suisse Private Equity are preparing to exit European bathroom equipment maker Grohe, Reuters reported. A trade sale or initial public offering could come as early as the second half of 2011, Reuters wrote. TPG and Credit Suisse bought Grohe for 1.5 billion euros in 2004.

(Reuters) – Private equity groups TPG Capital [TPG.UL] and Credit Suisse Private Equity are preparing to sell Europe’s biggest bathroom equipment maker Grohe [GROH.UL], two people familiar with the matter told Reuters.

“Talks with investment banks about the sponsor exit are ongoing,” one of the sources said, adding no banks have been officially mandated yet.

“Investment bankers are hoping an initial public offering (IPO) or trade sale could come as early as the second half of 2011,” a second source said, adding: “It was a long process which will finally come to an end.”

A spokeswoman for Grohe, which has sales of roughly 1 billion euros ($1.36 billion) and an estimated global market share of 8 percent, said an IPO was currently not being discussed with the company.

An IPO could reach a volume of 1 billion euros, a third source said, adding: “Grohe would be a clear candidate for Germany’s mid cap index <.MDAXI>.”

Before private equity investor BC Partners — a prior owner — took the group private in 2000, Grohe was listed in this index.

TPG and Credit Suisse bought Grohe for 1.5 billion euros in 2004 and loaded it with huge debt, sparking a big controversy over private equity investment in German companies.

At the time, the head of Germany’s Social Democratic Party, Franz Muentefering described private equity firms as “locusts”, which sucked takeover targets dry.

But critics acknowledge the private equity investors did a good job in restructuring Grohe and refrained from high payouts.

Grohe works council head Peter Paulokat has said that he did not think Muentefering’s “locust” analogy applied to Grohe.

Under the ownership of TPG and CS, Grohe moved production facilities outside of Germany but cut fewer jobs than the 3,000 originally announced and kept the research and development divisions in the country. It currently employs 5,000 staff.

Ratings agency Moody’s in November 2010 changed the outlook for Grohe’s credit rating to stable from negative.

“Grohe’s rebound is amazing”, an industry source said.

In the first nine months of 2010, Grohe benefited from a rebound in the construction industry and saw sales rise by 20 percent to 726 million euros, and earnings before interest, taxes, depreciation and amortization (EBITDA) spiked 37 percent to 144 million euros.

(Reporting by Arno Schuetze, Philipp Halstrick, Alexander Huebner; Editing by David Cowell)