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PAI’s Christian Hansen Starts $1.1 Billion Stock Sale

Christian Hansen Holding A/S, the Danish maker of food ingredients owned by private equity firm PAI Partners, is seeking as much as 6.5 billion kroner ($1.1 billion) in its initial public offering, terms of the sale show.

The Horsholm, Denmark-based company is offering 55.8 million shares at 87 kroner to 117 kroner apiece, according to terms of the sale obtained by Bloomberg News. The company is seeking to raise 450 million euros ($548 million) from selling new shares, and its existing shareholders will also sell a stake worth as much as 427 million euros, the terms show.

Christian Hansen is pressing ahead with its IPO even after a surge in stock-market volatility spurred by concern that Greece’s debt crisis is spreading roiled first-time share sales in Europe. At least four deals were shelved in the past five weeks, with Russian fertilizer maker UralChem Holding Plc and Germany’s GSW Immobilien AG pulling IPOs totaling $1.2 billion.

“You have to be an extremely good business to do an IPO in this market,” said Matthias Fankhauser, a Zurich-based fund manager at Clariden Leu, which oversees about $100 billion. “People are losing 6 percent in top positions of their fund - why would they want to look at IPO companies with zero record?”

European stocks slumped today, sending the Stoxx Europe 600 Index down 1.9 percent as of 2:56 p.m. in London, after Germany banned some bets against government bonds and financial institutions, sparking concern that regulation will increase.

Colors, Enzymes

PAI paid about 1.1 billion euros for Christian Hansen in 2005. It will retain a stake of about 50 percent in the company after the IPO, according to the termsheet.

Credit Suisse Group AG and JPMorgan Chase & Co. are managing the sale, together with Morgan Stanley, SEB Enskilda Equities and Danske Markets Equities. An extra 10 percent of shares being offered in the IPO will be sold in an overallotment option, given sufficient demand, the terms show.

Christian Hansen, a maker of natural ingredient solutions such as colors and enzymes, last month reported that earnings before interest, taxes, depreciation and amortization rose 30 percent to 78 million euros in the six months through February. Revenue in the period totaled 256 million euros.

Form Opinion

The company will be valued at 1.6 billion euros to 2 billion euros after IPO, according to the terms. That’s 10.26 times to 12.82 times Ebitda, if doubling the six-month earnings through February. Stocks trading on the benchmark Copenhagen OMX 20 Index have an average price to Ebitda ratio of 8.02.

“It’s likely that we’ll end up with some Christian Hansen shares,” said Torben Sand, who helps manage about $5 billion in Danish equities at Hilleroed, Denmark-based ATP. “But we have to analyze the prospectus very thoroughly before we form an opinion on the valuation and thereby the possible size of an investment.”

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.

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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