Tarkett Attracts Private Equity Funds

Paris, France, July 5, 2006---The majority shareholder of German floor-covering maker Tarkett AG is seeking a financial partner to help buy out minority shareholders, people familiar with the matter told Dow Jones Newswires. The move comes at the same time as Tarkett rival Gerflor, a smaller French company, has been put up for sale by its owner, French private equity firm PAI Partners, people familiar with that deal said. Both process have attracted the interests of private-equity funds, the people said. Tarkett's majority shareholder, French industrial family Deconinck, has decided to sell a 50% stake in Societe d'Investissement Familiales SA, the holding company it fully owns and which controls a bit more than 60% of Tarkett SA - itself a holding company that in turn owns 97.2% of Frankfurt-listed Tarkett AG, people close to the transaction said. Tarkett AG has announced it will soon be delisted after a squeeze-out, which aims at buying out the reminder of listed shares - less than 3% of the capital. With the cash brought by a new financial partner from the sale of shares in Societe d'Investissement, the Deconinck family intends to buy out the minority shareholders - or about one-third of the capital - in Tarkett SA, the people added. Investment bank JP Morgan is acting as an adviser to the Deconinck family, the people said. Tarkett's minority shareholders, among them French bank Societe Generale SA (13080.FR) and U.S. investment fund Brazos Mutual Funds are ready to sell at a good price, people familiar with the transaction said. They ended up with a stake in Tarkett as historic shareholders of French industrial company Sommer Allibert, whose flooring business was merged with Tarkett. Tarkett AG, which reported sales of more than EUR1.62 billion in 2005, would be valued around EUR1.5 billion, the people said. Tarkett posted a net profit of EUR57.8 million in 2005, up from EUR42.5 million. The Deconinck family is requiring that the acquisition of its shares by the financial partner not be financed by putting additional debt into its holding company, the people added. Investment funds Kohlberg Kravis Roberts & Co. and Vestar Capital Partners LLP are among the private-equity houses that have expressed an interest in the Tarkett process, even though the deal is an unusual one for them: They traditionally don't like to acquire minority positions and generally prefer to finance deals by injecting debt in the assets they buy, the people explained. "They might hope for a real leveraged buyout at later stage or for a change in the family's requirements," a banker said. Vestar in December acquired Swiss wooden-flooring company Nybron Flooring International for an undisclosed price from Nordic Capital, another buyout house. A Tarkett spokesman and JP Morgan spokeswoman declined to comment. Representatives for Societe Generale and Vestar couldn't immediately comment and a spokesman for KKR declined to comment. Meanwhile, French flooring company Gerflor, a Tarkett competitor on the PVC floor-covering segment, also has been put for sale by its owner, French private-equity house PAI Partners, other people said. French investment bank Rothschild & Compagnie has been chosen to advise PAI Partners, the people said. Memoranda of information haven't yet been sent to potential candidates, they added. PAI Partners bought Gerflor in 1998 for just more than EUR300 million, and it is targeting an enterprise value of around EUR350 million, or about one-time its 2005 annual sales, in aprocess seen to attract mostly private-equity firms, the people said. Floor-covering is a relatively low-growth business and highly dependent on the construction cycles, but provides steady cash flow to service debt, which makes it a good target for LBOs, private-equity professionals say.

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