Private equity firm Bain Capital agreed at the end of July to sell the German industrial chemicals distributor Brenntag to BC Partners in a secondary buyout worth €3.25bn rather than float the business.
The deal would be Germany’s second largest leveraged buyout after Fortress Investment Group bought real estate company Gagfah Gemeinneutzige in 2004 for €3.5bn.
BC Partners, which was advised by Morgan Stanley on the deal, is now preparing to list Brenntag on either Euronext or in the US.
Bain is understood to have sought out interest for Brenntag toward the end of last year around the same time that it was seeking a €1.89bn recapitalisation. Bain then mandated its financial adviser Goldman Sachs to hold exclusive talks with BC Partners.
Bain is thought to have gone for the secondary buyout option rather than a stock market flotation because it was looking for an imminent exit and a return on its investment for its limited partners. A stock market flotation would have been a longer route to realise this.
The deal was announced the same week the market learned that Bain had teamed up with KKR and Merrill Lynch to buy HCA, the largest hospital chain in the US, for $33bn, which would make it the biggest buyout deal in history.
Bain bought Brenntag and its associate company Interfer at the end of 2003 for €1.4bn from Deutsche Bahn, Germany’s rail operator. In less than three years, it had increased Brenntag’s revenue from €4.3bn to €5.3bn, but in the process laden the company with about €2bn worth of debt. Now BC Partners could make Brenntag take on as much as €2bn in debt to finance its purchase of the company. Deutsche Bank, Goldmans Sachs and Morgan Stanley are financing the deal.