Target: CPG International Inc
Price: As much as $1.5 billion
Seller: AEA Investors LP
Financial Advisers: Barclays, Deutsche Bank
The private equity firms are through to the second round of bidding and are preparing to submit offers by the middle of August, the people said, asking not to be named because the matter is not public.
CPG is itself owned by a private equity firm, AEA Investors LP. It has hired Barclays and Deutsche Bank to find a buyer for the company, which makes building supplies for residential and commercial markets such as outdoor decking and porch boards, Reuters reported in May.
CPG International, Warburg Pincus, TPG, Berkshire Partners and Ares declined to comment. AEA did not respond to a request for comment.
Headquartered in Scranton, Pennsylvania, CPG International makes synthetic construction and building products to replace wood, metal and other materials, according to its website. CPG filed for an initial public offering in 2011 but never went ahead with it. An outright sale to another private equity firm may now look more appealing to AEA given the recent concerns of stock market investors over the state of the home building market.
Fears that the residential construction sector may be overheating led to home builder WCI Communities Inc selling fewer shares than planned and pricing its $102 million IPO at the bottom of its guided range in July. Shares of home builder Taylor Morrison Home Corp, which TPG and Oaktree Capital Group LLC took public in April, traded as low as its IPO price for the first time in late July, ending trading down 7 percent on such fears.
AEA acquired CPG International in 2005 from private equity firms Whitney & Co and Clearview Capital LLC for $380 million, according to a 2006 bond sale regulatory filing. AEA put in $149 million as equity for the deal, the filing shows.
Last year, CPG bought TimberTech, a U.S. manufacturer of low-maintenance decking, railing and fencing, for $320 million from the Crane Group. Standard & Poor’s Ratings Services Inc projected at the time the deal would boost CPG’s revenues by more than one third to about $530 million in 2013, with EBITDA at about $100 million.
Were Berkshire Partners to prevail in the auction, it would be the second company in the housing sector it would have bought from AEA this year. In February it acquired a majority interest in SRS Distribution Inc, the fourth largest residential roofing distributor in the United States, from AEA for an undisclosed sum.
Soyoung Kim and Greg Roumeliotis are correspondents for Reuters in New York.