CVC aims for €5.2bn solo spending spree

CVC Capital Partners is pursuing a multi-billion euro investment plan, edging out Permira in the auction for Ruhrgas and teaming up with Repsol for Royal Dutch/Shell’s liquefied petroleum gas operation.

Spanish energy giant Repsol has teamed up with the UK-based buyout firm in a circa €2.5bn bid for the Royal Dutch/Shell assets. The deal, with which Repsol has been linked since the start of the year, would give CVC 40% of the company after the buyout. Citigroup, Credit Suisse First Boston, Rothschild and Lazard are running the auction.

CVC Capital Partners has already beaten rivals to acquire Ruhrgas Industries, German utility E.ON’s gas and electricity metering division. The mooted sales price is €1.3bn, a significantly higher valuation than initial expectations of around €1bn.

There are likely to be other bids in the Shell LPG process, people familiar with the proceedings said. Texas Pacific, Permira and BC Partners are understood to be looking at the situation. KKR, Goldman Sachs, Carlyle, PAI, Blackstone and Cinven are also considering whether they will bid.

On the trade buyer side, US gas distributor UGI is interested in Shell LPG and could bid either on its own or in partnership with another private equity firm, according to deal sources.

The process is still in the early stages, but the vendor is keen to broker a disposal. Shell said last year that it would review the business as it wanted to raise between US$10bn and US$12bn as part of the restructuring of the group, which was hit by scandal over how it accounted for its oil and gas reserves.

Shell and joint venture partner BASF sold German chemicals maker Basell for US$5.7bn last month.

CVC edged ahead in the Ruhrgas auction, gaining the advantage over Permira, BC Partners and Cinven. A source close to one of the bids said that these three firms had also expressed interest in the company.

Ruhrgas has been under auction through Deutsche Bank since regulators ordered a sell-off due to competition concerns. E.ON acquired the unit as part of a €10bn deal for gas supplier Ruhrgas from oil giant BP in 2003.

Morgan Stanley and CIBC are providing debt financing for the CVC bid. The financing package is heard to carry leverage in the region of 6x. The sale follows Montagu Private Equity’s buyout of sector comparable Actaris. That transaction was backed by a Mizuho-arranged €365m loan.

CVC has also made a €1.4bn takeover offer for Spanish clothing retailer Cortefiel, although it has withdrawn from the circa €12.5bn Auna auction on price grounds.

The €17.9 per share offer for Cortefiel is friendly and dependent on CVC gaining 75% acceptance from shareholders, as well as the removal of certain restrictions on voting rights.

Other private firms are expected to place competing bids. These could be in partnerships with other retailers. Cortefiel is 55% owned by the Hinojosa and Garcia-Quiros families.

Only two consortia submitted second round bids in the auction of Auna, the Spanish telecom that is under sales process through Merrill Lynch. Three bids were expected but the consortium comprising Apax Partners, Cinven and CVC Capital pulled out of the race, saying the price was too high. The decision is a blow for backing banks CSFB, HSBC, ING, RBS and SG, which were hoping to play a role in what will be one of the biggest LBOs in Europe should an agreement be reached.

A bid has been tabled from a group comprising Blackstone, Carlyle, Providence, Permira and Ono, Auna’s rival, which was originally bidding for part of the business on its own. The other bid is from KKR, BC Partners and Goldman Sachs.

Auna has been the subject of buyout rumours for about a year, but shareholders formalised the auction in April. BSCH holds 27% of Auna, while electricity company Endesa has a 32% stake and utility Union Fenosa controls 18.6%. Prior to the appointment of Merrill Lynch, the shareholders had been planning an IPO for the company in 2006.