Tarkett SA took the first regulatory step toward selling shares in an initial public offering as 50 percent-owner KKR & Co. (KKR) seeks to exit the French floor maker amid rising valuations of building product companies.
Tarkett, which is also owned by the Deconinck family, registered the IPO documents with France’s AMF market regulator yesterday to sell shares on the NYSE Euronext (NYX) exchange in Paris, the company said in a statement today. Based on valuations of competitors, an IPO may value Tarkett at between $2.5 billion and $3.8 billion, a person familiar with the plan said earlier this year.
IPO volumes in Europe rose sixfold last quarter, according to data compiled by Bloomberg, as investors responded to a strengthening economy. Tarkett’s sales rose 11 percent to 2.3 billion euros ($3.1 billion) last year, helped by acquisitions and demand in Eastern Europe, Asia and North America.
“There are signs in the large European countries that we’re at the start of a cyclical recovery,” Michael Watts, a London-based Berenberg analyst, said by phone. “Shares of many building product and distribution companies are fairly close to recent highs.”
Tarkett, based in the Paris suburb of Nanterre, has been jointly owned by KKR, the private-equity firm run by Henry Kravis and George Roberts, and the Deconinck family since 2007. KKR will sell some of its shares in the IPO, while the Deconinck family will buy additional ones to increase its stake to more than 50 percent, Tarkett Chief Executive Officer Michel Giannuzzi said at a press conference in Paris today.
The company is the world’s third-largest maker of flooring products for residential and commercial markets after Mohawk Industries Inc. (MHK) and Berkshire Hathaway Inc. (BRK/A)’s Shaw Industries Group, Giannuzzi said.
Tarkett joins French cable TV operator Numericable SAS and battery company Blue Solutions in seeking to list this quarter. The deals will mark a return in activity in France’s capital markets, where the last sizeable deal was in December 2009 when automotive distributor CFAO SA raised 927 million euros ($1.3 billion) including an over-allotment option in an IPO, according to data compiled by Bloomberg.
KKR is planning to raise about 500 million euros through the IPO, people with knowledge of the matter said in June. Giannuzzi declined to comment on how much the IPO may raise.
Tarkett last year had adjusted earnings before interest, taxes, depreciation and amortization of 260 million euros. Its Ebitda rose 19 percent in the first half of 2013, helped by productivity gains and the acquisition last year of Tandus, a specialist in commercial carpet flooring in North America.
Mohawk Industries, whose shares have risen 45 percent this year, and Swiss competitor Forbo Holding AG, which has gained 22 percent, respectively trade at 12.4 and 8.5 times estimated 2013 Ebitda, according to Bloomberg data.
Tarkett aims for a profit margin of more than 12 percent on that basis over the 2012 to 2016 period, during which acquisitions may add about 300 million euros in sales. The dividend policy will be to pay out about 40 percent of net income.
The company today didn’t give details on the timing of the IPO and said the process is subject to market conditions and approval by the AMF.
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