US-based private equity firms have been actively seeking European companies from the start of the year and another big bid might be on the way. Reports on Sunday suggest that Hellman & Friedman is set to launch a takeover bid for Auto Trader in the UK.
According to the Sunday Times, the private equity firm is proposing a £2 billion takeover bid for the company. According to the report, the firm has hired adviser to help it launch a successful bid.
The firm is expected to have a business plan in place already and it has sorted out the finances to support the deal. The private equity firm was able to raise $11 billion for its new buyout fund last year. This became the firm’s largest fund since its birth in 1987 and it was the biggest fundraiser launched and completed last year.
Hellman & Friedman has also similar companies to Auto Trader already in its portfolio. The firm bought the German digital marketplace for cars and property, Scout24, in 2013 from Deutsche Telekom. Some experts believe if the Auto Trader deal is to go through, the firm might plan to merge these two companies and then possibly seek for a sale or initial public offering (IPO).
Scrapping the IPO plans?
The news comes at a time, when Auto Trader’s current owner, the private equity firm Apax, was looking for a potential IPO. According to the sources, the firm has been looking to float the company on the stock market, with its mind set on a £2 billion flotation.
According to the Financial Times, Bank of America Merrill Lynch and Deutsche Bank are working on the IPO, planned to take place in March. The report believes the firm was looking to sell around 30% of Auto Trader for around £600 million, which would mean a total value of £2 billion.
The private equity firm first bought a part in Auto Trader in 2007. Apax took hold of the company in 2014, when it bought the remaining 50.1% of the company from the Guardian Media Group. The deal was worth £1.75 billion, including debt.
If Apax decides to sell, it wouldn’t be the first time the company backs out from a potential listing. Last year the firm ended up selling Travelex, even though it initially sought a stock market listing.
The Dual Track Process Gains More Popularity
The news also highlights private equity firms’ thirst for dual track process. More firms are now set to look at a potential sale while also considering listing on the stock market. IPOs gained popularity during the stock boom last year, but have slowly started to fade away again, as some listings last year failed to perform as well as hoped. Experts also believe the listing activity in the UK will remain low in the lead up to the country’s general election in May. Investors are wary the financial markets can be fluctuating a bit before the next government is decided.
None of the parties provided a public comment at the time of writing. It remains to be seen whether Apax would prefer to sell rather than risk listing at this time.