June 26, 2018 / 10:35 AM / 24 days ago

Exclusive: KKR preps vending machine operator Selecta for $1 billion IPO - sources

FRANKFURT/LONDON (Reuters) - Buyout group KKR (KKR.N) has started preparations to list vending machine operator Selecta on the Swiss bourse as soon as the fourth quarter of 2018, people close to the matter said, adding to a flurry of major listings in the country.

The private equity firm is working with investment bank Lazard (LAZ.N) as IPO advisor on the deal, they added.

Lazard has already approached other banks to gauge their interest in helping organize the transaction which may see shares worth about 1 billion Swiss francs ($1 billion) sold, one of the people said.

In a bid to lock in high stock market valuations, the Selecta IPO may take place in late 2018, although a 2019 deal is also a possibility, the people said, adding KKR would also be open to an outright sale if it receives attractive offers.

KKR declined to comment. Lazard had no immediate comment.

Serving more than 10 million customers daily, Selecta operates self-service coffee and convenience food dispensers, more than half of which are located at private businesses, with the rest in places like train stations and hospitals.

The company is targeting 2018 adjusted earnings before interest, tax, depreciation and amortization of 245-255 million euros ($286-298 million) or more than 300 million including unrealized synergies, it said in a bondholder presentation in May. Its quarterly revenue stands at about 380 million.

Including debt it may be valued at about 10 times its expected core earnings in a potential deal, one of the sources said.

The initial public offering would add to a flurry of flotations in Switzerland this year, which have included that of Ceva Logistics (CEVAL.S) and sensors maker Sensirion (SENSI.S), while others such as the listing of packaging maker SIG are expected in coming months.

Switzerland has, however, also seen IPOs fall through, as investors have taken a harder line on the price they are willing to pay.

KKR bought its majority stake in then ailing Selecta from Allianz Capital Partners (ACP) in 2015 for a small purchase price, sources familiar with the matter said at the time.

ACP had acquired it in 2007 for 772 million pounds backed by 690 million pounds of loans, in an example of the highly leveraged buyout deals struck in boom times but proving unsustainable as Europe’s economy went into recession.

Selecta ran into difficulties in repaying its loans, and after an unsuccessful sales attempt in 2012, KKR agreed in 2014 to provide a 220 million euro quasi-equity payment-in-kind loan to Selecta, which helped it to avoid a debt restructuring.

In March 2018, Moody’s upgraded Selecta’s credit rating to B3 from Caa1, citing a successful refinancing of the company.

Founded in 1957, Selecta was owned by Swiss trading and logistics group Valora (VALN.S), which listed Selecta on the stock exchange in 1997, before it was taken over by Compass Group (CPG.L) in 2001.

Under KKR’s ownership, Selecta has cut costs and expanded with the acquisitions of peers Pelican Rouge and Argenta, with the aim of being number one or two in each market it operates.

Additional reporting by Oliver Hirt; editing by Edward Taylor, Christoph Steitz and Alexandra Hudson

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