Private equity eyes debt-free public company deals

By Simon Meads

LONDON (Reuters) - Buyout firms are eyeing minority stakes in publicly listed companies as sparse credit conditions prompt them to look for deals requiring no leverage -- although they still want private-equity style returns.

Debt funding for buyouts has dried up in the wake of the credit crisis, leading many large European and U.S. buyout houses to consider PIPEs -- private investment in public equity -- as a means of putting their $1 trillion (600 billion pound) cash pile to work.

"I suspect every firm at the moment is, or should be, looking at the public market as a source of deals," said Michael Wand, managing director at the Carlyle Group.

Wand said Carlyle was not likely to do PIPE deals "right and left" but would invest if it liked a public company and could attain enough control in this way.

One recent example is Carlyle's return as a shareholder of German human resources software and services company Personal & Informatik (P&I) through the purchase of a 29.34 percent stake.

It had owned a majority stake in the business until 2007 before selling out, but decided to reinvest as it thought P&I's recent performance had yet to be reflected in the share price, Wand said.

Elsewhere, BC Partners last week agreed to invest $350 million in Office Depot (ODP.N), the U.S. office products firm, in a deal that could give it around 20 percent of the group.

BC reckons it could make gross returns of 25 to 30 percent, aided by a 10 percent dividend payout, senior partner Jamie Rubin said. Rubin said Office Depot's profitability was likely to soar as the downturn ends.