PAI to acquire Carlyle’s B&B in €825m SBO

Enterprise value for B&B Hotels remains confidential, but an unquote" source placed it at €825m. This compares with the €480m value attributed to the business when it was bought by Carlyle and Montefiore in September 2010.

Pending works councils consultation, Carlyle's sale of its majority stake could result in a return that betters 2x, according to the same source.

According to PAI, the purchase will be funded via its sixth buyout fund, which closed on its €3.3bn hard-cap in January 2015. The vehicle, targeting LBOs in the European mid- to large-cap space, was most recently used to acquire a 40% stake in Madrid-headquartered outsourcing specialist Konecta.

PAI's takeover plans mark the GP's return to the buy-side after a recent wave of divestments. Earlier this week, the firm found itself at the opposite end of the negotiations table with Carlyle when it sold Dutch lingerie retailer Hunkemöller to the latter for a 2.3x return.

On the previous day, PAI announced talks to exit French bottle-top manufacturer Global Plastic Closures to listed corporate RPC Group for €650m.

Previous funding
According to unquote" data, this is the fourth PE-backed buyout B&B Hotels has seen since inception. In July 2003, when it still operated under the Galaxie brand, the company was fully acquired by mid-market GP Duke Street from founder François Branellec for more than €200m.

In July 2005, the company changed hands to Eurazeo for an estimated €400m. The SBO marked the end of an auction process initiated by Duke Street with the aim to exit B&B's real-estate assets only; however, Eurazeo's bid persuaded the seller to offload the whole business.

In September 2010, Eurazeo scored a 2.1x return and 22% IRR when it sold B&B to Carlyle and Montefiore. The former became a majority shareholder, while the latter secured a minority stake, as did the company's management team. Carlyle drew equity from both its €5.4bn third buyout fund and its €2.2bn third real estate fund.

Under Carlyle and Montefiore's five-year tenure, B&B is understood to have added 110 new establishments to its existing 343-strong network; the expansion has reportedly led to a 13% EBITDA uptick over the period.

Company
Founded in 1990, B&B runs a network of budget accommodation establishments. Headquartered in Brest, the business manages more than 28,000 rooms across 343 hotels in France, Germany, Italy, Spain, Poland, the Czech Republic and Morocco, and claims to be the third largest operator in France and the second largest in Germany. According to an unquote" source, the company most recently posted €153m in EBITDA.

People
The work of PAI on the deal was coordinated by partner Edward Chandler. Carlyle was represented by managing director Jonathan Zafrani, and Montefiore by CEO Eric Bismuth. Georges Sampeur is the current president of B&B's board.

Advisers
Vendor - Morgan Stanley (M&A); HSBC (M&A); Weil Gotschal (Legal); PwC (Financial due diligence).

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• PAI Partners
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• Montefiore Investment