FRANKFURT (Reuters) - German bathroom fixtures maker Grohe
Grohe's owners, investor TPG Capital
The potential sale to rivals, which could value Grohe at up to 4 billion euros ($5 billion), could become the largest European deal involving private equity investors this year, ahead of BC Partners'
Grohe's Swiss peer Geberit
Private equity firms buy companies, try to boost their profitability by cutting costs, merging them with rivals or shaking up operations, and then sell them on in the hope of making a return.
While Grohe's owners have been sounding out buyer interest for the last two years, they earlier this year launched initial public offering (IPO) preparations to try to extract the most value possible from the asset.
Grohe, which has an estimated global market share of about 8 percent, posted sales of 1.4 billion euros and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of 273 million euros last year. It has not provided specific 2013 earnings guidance, which is usually used as a starting point to compare the enterprise value of companies.
Grohe's owners are hoping for a valuation similar to the 14.4 times EBITDA that Geberit trades at, the sources said. Bidders, on the other hand, are likely to offer valuations more in line with the 10.3 times EBITDA that French peer Legrand
"Grohe continues to evaluate all strategic options," a spokesman for the company said.
TPG and Credit Suisse, as well as Goldman Sachs
TPG and Credit Suisse bought Grohe for 1.5 billion euros in 2004 from BC Partners, backed with 1.45 billion in debt, most of which was loaded on to Grohe, leading to criticism of private equity investors in Germany.
The head of the center-left Social Democratic Party at the time dubbed private equity firms "locusts" that sucked the life out of targets before letting them go bust and moving on.
In a move to shift production to low-wage countries, TPG and Credit Suisse began job cuts at Grohe but carried out many fewer than the 3,000 redundancies originally planned. It kept keeping research and development in Germany.
($1 = 0.7778 euros)
(Reporting by Arno Schuetze, Alexander Huebner and Denny Thomas; Editing by Alex Smith and Pravin Char)
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