LONDON Private equity firm Electra (ELTA.L) has hired Rothschild to explore a sale or a refinancing of electronic animal identification company Allflex, which is worth about $1 billion, four industry sources with knowledge of the plan said.
Electra said it had hired Rothschild but did not confirm that Allflex was up for sale.
"In the 24-plus years that Electra has been invested in Allflex there have been numerous times where we have considered our options and concluded that the most value would be created by retaining or increasing our investment in the business," said a spokesman for Electra.
Electra bought Allflex in 1998 after the European Union tightened food traceability rules in the wake of the Bovine Spongiform Encephalopathy (BSE) crisis, commonly known as "Mad-Cow disease."
The company has since become the world leader in electronic traceability with factories in France, Brazil, Poland and China.
Allflex offers appealing growth prospects because electronic animal identification is increasingly regulated, which makes it harder for new players to start a business from scratch.
It could be worth over $1 billion based on a 10 to 12 times valuation applied to earnings before interest, tax, depreciation and amortization (EBITDA) of $100 million, the sources said.
Private equity firms and bankers advising them are confident that investors, hungry for deals in a depressed M&A market, are ready to pay a price for Allflex that could persuade Electra to sell the business.
"It's a fantastic opportunity for Electra, they could make three to four times their money in that deal," said a banker, leafing through a 20 page-marketing document entitled "Introduction to Allflex 2013" sent by Rothschild to possible bidders.
The banker said the sale process could start in four to five weeks and that most private equity firms would look at the dossier.
"If I could get it for less than a billion, I would buy it every single day. But I am afraid it will go for much more," said one potential buyer.
US trade buyers like Danaher (DHR.N), 3M (MMM.N) and Berkshire Hathaway (BRKa.N) are also expected to look at the dossier, private equity firms and their bankers said, while doubting any of them would be keen enough to actually buy the company.