TPG-backed Grohe may launch IPO as early as Thursday

TPG Capital and the private equity arm of Credit Suisse are divesting Grohe in a so-called dual track process, which includes the options of floating it on the stock exchange or selling it to a peer.

Of the suitors, Japan’s Lixil has emerged as the leading bidder with an offer of roughly 3 billion euros ($4 billion), the sources said.

A spokesman for Swiss peer Geberit, which had initially taken part in the auction, said it had not submitted a binding bid for Grohe.

“It’s a game of poker now,” said one of the sources familiar with the transaction. “Both options are on the table and they will remain on the table even if the intention to float is published later this week.”

A stock market listing usually takes place about four weeks after the publication of the intention to float – time that will likely be used to continue M&A negotiations, the sources said.

Rallying stock markets mean Grohe would likely be able to secure a high IPO valuation. However, as TPG and Credit Suisse would only float a stake in Grohe, they would have no certainty of being able to sell further shares at the same price at a later time.

“Lixil can afford to bid just below the possible IPO valuation, but it cannot be too far off,” another source said. One of the IPO organizers has signaled the group could be valued at 3.2-3.5 billion euros in a flotation, sources have said in the past.

The sellers had originally hoped for a valuation of up to 4 billion euros in equity and debt, in line with the valuation of Geberit, which trades at 14 times EBITDA.

U.S.-based Fortune Brands has dropped out of the auction, while interest from Brazil’s Duratex has also cooled, the sources said.

TPG and Credit Suisse bought Grohe for 1.5 billion euros in 2004 from BC Partners.

Grohe and its owners declined to comment. Lixil said it did not rule out an acquisition, but that nothing had been decided. Duratex was not immediately available for comment.

Arno Schuetze is a reporter for Reuters News in Frankfurt