September 21, 2018 / 8:57 AM / in a month

Lone Star eyes float of German building materials maker Xella: sources

FRANKFURT (Reuters) - Buyout group Lone Star is considering a stock market flotation of German building materials maker Xella which it bought in 2016 for 2.2 billion euros ($2.6 billion), three people close to the matter said.

The investor could opt for a second-quarter listing in Frankfurt, the people said, adding that it had recently interviewed investment banks and asked for their ideas to develop the company.

However, so far no formal pitching process for roles in a potential initial public offering has taken place and no decision on any deal has been taken, they added.

Lone Star and Xella declined to comment.

Like other private equity investors, Lone Star is trying to benefit from high stock valuations before a possible correction on stock markets and it is therefore considering an IPO after a relatively short period of ownership, the people said.

“Everyone is trying to get out of the door before it closes,” one of the people said.

Among other, Carlyle-owned chemicals firm Atotech is currently exploring a 2019 IPO with Solebury Capital advising and has already had initial conversations with investment banks, while an official pitching process will take place within the next couple of weeks, people close to the matter said.

In a potential pre-summer 2019 deal, Xella would likely compete for investor attention with a number of other IPO hopefuls, including Volkswagen’s expected blockbuster 6 billion euro listing of truck and bus business Traton.

Xella says it is one of the world’s leading manufacturers of aerated concrete blocks, calcium-silicate units and non-flammable mineral insulation boards with brands including Ytong, Hebel and Silka.

Last year, it posted adjusted earnings before interest, tax, depreciation and amortization of 248 million euros ($292 million) on sales of 1.4 billion euros.

Listed peers such as Wienerberger (WBSV.VI) and Imerys (IMTP.PA) trade at 7 to 8 times their expected core earnings.

Lone Star has already partially cashed out of Xella with a 650 million euro payout, which prompted Moody’s to cut Xella’s rating outlook to negative in June.

At the time, the ratings agency said that the move increased the ratio of Xella’s net debt to EBITDA to 6.2 times from 5.3 times, based on 2017 numbers adjusted for the sale of Xella’s lime business and the acquisition of a maker of insulation products.

Xella has 91 production plants in 20 countries and employs 6,100 staff globally.

The firm is a former investment of German family investment group Haniel, which started trading building materials in 1948 and later bought the Ytong and Hebel brands. Haniel divested the firm in 2008 to buyout groups PAI and Goldman Sachs Capital Partners, which in 2016 sold it on to Lone Star.

Reporting by Arno Schuetze; Editing by Maria Sheahan and Adrian Croft

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