April 17, 2012 / 5:33 PM / 6 years ago

Exclusive: Carlyle to explore $1 billion Metaldyne sale: sources

NEW YORK (Reuters) - Private equity firm Carlyle Group LP is looking to sell auto parts supplier Metaldyne and hopes to fetch as much as $1 billion as it cashes in on a strong recovery in vehicle production volumes, according to people familiar with the matter.

The potential sale of Metaldyne could prove a strong earnings win for Carlyle almost three years after the U.S. auto supplier filed for Chapter 11 bankruptcy protection and as the private equity firm is about to go public in an IPO.

Carlyle, which led an investment group that acquired Metaldyne assets out of bankruptcy in late 2009, has chosen Bank of America Merrill Lynch to advise on a possible sale of Metaldyne after interviewing investment banks in February, according to the sources.

The Plymouth, Michigan-based supplier is projected to have about $150 million to $160 million in earnings before interest, tax, depreciation and amortization (EBITDA) in 2012 and could be sold for about six times EBITDA, they said.

Metaldyne is among several automotive assets that have gone on the auction block over the past year as hedge funds, distressed investors and private equity firms that snapped up assets during the industry recession look to take advantage of improving vehicle production in North America.

A successful sale of Metaldyne would boost Carlyle’s profit after it returned a record $19 billion to fund investors in 2011 and reported a 152 percent year-on-year jump in distributable earnings.

Following a turbulent year in the financial markets in 2011, private equity firms are taking advantage of recovering equity and debt markets to realize exits from investments by selling assets either through mergers and acquisitions or through IPOs.

Last month, Carlyle floated Allison Transmission Holdings Inc, a manufacturer of automatic transmissions for trucks, buses and military vehicles it bought with Onex Corp from General Motors Co for $5.6 billion in 2007, in an IPO that raised $600.3 million.

In December, Carlyle sold another auto parts supplier, Diversified Machine Inc, to Platinum Equity for an undisclosed amount. Sources told Reuters the business was to fetch more than $400 million.

Carlyle said on Monday it was looking to raise between $701.5 million and $762.5 million in its initial public offering, valuing the company at as much as $7.61 billion, as it presses on with plans to catch up with rivals Blackstone, KKR and Apollo Global Management.


Metaldyne makes metal-formed components and assemblies for powertrain applications, including engine connecting rods, transmission valve bodies and balance shaft modules.

High debt and a severe slump in vehicle production volumes in North America forced it into bankruptcy, but the company has since made an impressive comeback.

The company now boasts about $1 billion in annual revenue and more than 4,000 employees. Its customers include all major automakers including General Motors, Ford Motor Co, Chrysler Group LLC and BMW AG.

Carlyle is expected to start the sale process for Metaldyne in the next several weeks and could receive interest from private equity firms as well as trade buyers, according to people familiar with the matter.

U.S. auto sales rose about 13 percent in March, rounding out the best quarter for U.S. vehicle sales since 2008 and raising the prospect that major automakers would have to scramble to boost production and lift full-year sales forecasts.

The U.S. auto industry has been in a slow, sporadic recovery for the past two years, and the March data suggested the pace of the recovery is gathering steam, bolstered by the need for customers to replace aging clunkers amid rising gasoline prices, and improved consumer confidence in the wake of a stabilizing job market.

Representatives for Carlyle declined to comment. Metaldyne and Bank of America Merrill Lynch did not have immediate comment.

Reporting by Greg Roumeliotis and Soyoung Kim in New York; editing by Matthew Lewis

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