Siam Cement Group (SCG), Thailand's top industrial conglomerate, has decided not to join a takeover bid for Grohe AG, the German bathroom fixtures maker, in a deal that could be Europe's biggest private equity transaction this year.
Chaovalit Ekabut, SCG's vice-president for finance and investment and the chief financial officer, said the company was approached by Grohe a few months ago and asked for details about the European company to study.
"We've already come to the conclusion that we will not join this bid, basically because we want to focus on the area that is our strong foothold, which is Asean," Mr Chaovalit told the Bangkok Post in a telephone interview from Hong Kong.
SCG has been reported along with Switzerland's Geberit AG as having expressed interest in buying Grohe, a private company said to be worth 4 billion euros (163 billion baht). Bidders were asked to submit tentative offers by the end of next week.
Grohe's owners, TPG Capital and the private equity arm of the Credit Suisse Group, are running a dual-track process, where one track is to pursue an initial public offering (IPO) of Europe's biggest bathroom equipment maker and the other is to sell to a buyer.
Mr Chaovalit said the high transaction value was one factor leading SCG to rule out joining the takeover offer.
Reuters said the Illinois-based Fortune Brands has also expressed interest in Grohe in the past but has not been in active pursuit lately.
Boosted by a surging stock market and economy, Thai companies launched a record US$24.7 billion worth of outbound mergers and acquisitions last year, more than the combined total of the previous 10 years, according to Thomson Reuters data.
SCG this week said it plans to expand internationally to meet booming demand in Southeast Asia. With 30% owned by the Crown Property Bureau, the Thai Royal Family's investment arm, SCG has invested 92 billion baht since 2001.
Grohe's private equity owners have signalled a willingness to sell for two years now. In addition to previously sounding out buyers, the company launched preliminary plans for an IPO.
Private equity firms usually prefer to sell to a buyer, as the process is quicker and less subject to the fluctuations of the stock market than an IPO.
Grohe, which has an estimated global market share of 8%, posted sales of 1.4 billion euros and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of 273 million euros last year. It has not provided specific 2013 earnings guidance, which is typically used as a starting point to compare the enterprise value of companies.
Grohe's owners are hoping for a valuation similar to the 14.4 times EBITDA that Geberit trades at, the sources said.
Bidders, on the other hand, will likely offer valuations more in line with the 10.3 times EBITDA that French peer Legrand SA trades at."Grohe continues to evaluate all strategic options," said a spokesman for the company.
Shares of Siam Cement (SCC) closed yesterday on the Stock Exchange of Thailand at 448 baht, down four baht, in trade worth 411 million baht.