Berkshire in advanced talks to buy Hellman & Friedman’s Catalina Marketing

The Boston-based buyout firm has emerged as the lead bidder in the auction for Catalina Marketing and is in talks to finalize a purchase agreement in coming days, the people said.

Discussions are ongoing and could still fall apart, the people cautioned, asking not to be named because the matter is not public. Berkshire and Hellman & Friedman declined to comment, while representatives for Catalina could not be immediately reached for comment.

Bank of America Merrill Lynch, which is advising Hellman & Friedman on the sale process, also declined to comment.

Reuters first reported in January that Hellman & Friedman was exploring a sale of Catalina Marketing, which has the world’s largest shopper history database according to its website. 

Catalina has annual EBITDA of around $230 million and was hoping to fetch at least 10 times that amount in a potential sale, people familiar with the matter said previously.

Catalina says it influences the decisions of more than 75 percent of American shoppers through marketing services that include coupons at retail checkout counters, promotions delivered to consumers’ smartphones and websites.

The Saint Petersburg, Florida-based company works with more than 25,000 grocery, drug and department stores across the United States, including Safeway Inc, Rite Aid Corp and Sears Holdings Corp’s Kmart discount chain, according to its website.

The auction initially drew interest from other private equity firms including Silver Lake Partners and BC Partners Ltd, according to the people familiar with the matter.

But these firms decided not to submit final bids due early this week, concerned about the marketing industry’s transition to digital and its potential impact on Catalina’s growth trajectory in the next several years, the people said. Silver Lake declined to comment, and BC could not be immediately reached for comment.

Catalina had revenue for the 12 months to the end of June of $661 million, according to Moody’s Investors Service Inc. Hellman & Friedman took Catalina private in 2007 in a $1.7 billion deal.

The San Francisco-based private equity firm has sold at least two other of its portfolio companies in recent months to take advantage of red-hot capital markets that favor buyout firms which seek to cash out on their investments.

Soyoung Kim and Greg Roumeliotis are reporters for Reuters News in New York