KKR preps MTU for IPO

Buoyed by the successful German IPOs for Premiere and Conergy, KKR is planning to sell a portion of its stake in MTU Aero Engines. The deal would come just two years after KKR took control of the jet engine manufacturer.

The IPO is expected to emerge in late-April at the earliest, with a listing in middle to late-May. UBS and Goldman Sachs have joined Deutsche Bank in the syndicate, with the deal on course to total around €1bn. Depending on the amount of capital to be raised, this would allow KKR to sell a significant portion of the firm.

KKR is believed to have paid about €1.5bn when it acquired MTU in 2003 from DaimlerChrysler. The company is currently restructuring the business in preparation for the IPO. Last month, MTU paid back €79m of debt ahead of schedule, reducing bank liabilities to €106m and cutting gross annual interest by €4m. This followed the early repayment of €130m in debt in October and of €70m in debt in November.

“Apart from the implementation of our Impact 100 restructuring and savings programme, favourable business and market developments have helped us to substantially improve cashflow in the past year,” said Reiner Winkler, chief financial officer of MTU. MTU’s available liquidity, including undrawn loans, is about €230m.

Shares of German pay-TV company Premiere traded up strongly following the IPO, allowing Permira to cut its stake in the business from 54% to 23%. Total deal size was €1.179bn, with the deal pricing at the top of the range and still generating an oversubscription. The shares were priced at €28 and by March 24 were up 13.4%, having hit a high of €31.95 on the first day of trading on March 9.

A week after Premiere, energy company Conergy completed its IPO amid huge demand. That company is not private equity-owned, but the success of the deal was startling in a country where new issues have traditionally struggled to get away.