PAI’s Christian Hansen Seeks 450 Million Euros in IPO

Christian Hansen Holding A/S, the Danish maker of food ingredients owned by private equity firm PAI Partners, plans to raise 450 million euros ($602 million) in an initial public offering.

Credit Suisse Group AG and JPMorgan Chase & Co. will manage the sale, with Morgan Stanley, SEB Enskilda Equities and Danske Markets Equities assisting, according to a term sheet for the offering obtained by Bloomberg News. Horsholm, Denmark-based Christian Hansen will set a price range for the shares in mid-May before setting the final price at the end of the month.

Private equity firms are taking advantage of a rebound in equity markets from their February lows to sell assets after returning less money to clients in 2009 than any year on record. Brenntag AG, the chemicals distributor owned by BC Partners Ltd., raised $1 billion in an IPO last month. PAI may retain a “large stake,” said Christian Hansen Chief Executive Officer Lars Frederiksen.

“They are very pleased with the progress of the company,” the CEO said in an interview. After the listing, “we can do the things we want to do,” he said.

PAI paid about 1.1 billion euros for the maker of natural colors and specialty sweeteners used in drinks and ice creams in 2005. The firm hasn’t decided how many shares it will sell in the offering, according to the term sheet.

Debt will drop to three times earnings before interest, tax, depreciation and amortization, from five times, as a result of the listing, Frederiksen said. That will enable the company to make acquisitions using cash flow from operations and issuing investment-grade debt, he said.

Ebitda Climbs

Since 2005, Christian Hansen has sold unprofitable units and concentrated on dairy cultures and enzymes, health products, and colors, allowing it to become “market leader” in all three, he said.

Christian Hansen said today earnings before interest, taxes, depreciation and amortization rose 30 percent to 78 million euros on revenue of 256 million euros in the six months through February.

PAI, which is based in Paris, cut the size of its 5.4 billion-euro leveraged buyout fund by half in December after two top dealmakers left the firm, prompting some investors to attempt to remove money from the pool.

Formerly the private equity unit of French bank Paribas, PAI targets companies worth more than 500 million euros. It owns stakes in United Biscuits, the maker of McVitie’s products, and the Cortefiel clothing chain in Spain. It also controls French homebuilder Kaufman & Broad, and FTE Automotive, a German supplier of car parts.

Buyout firms such as PAI typically use loans secured on the targets they acquire to finance about two-thirds of the purchase price, and cash from their own funds for the rest. The firms seek to improve performance at the companies they acquire or expand them before selling them within about five years.

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