Watching your back

15 June 2009

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Every major corporate crisis seems to spark rumours of private equity big guns circling the floundering target. Recently, parts of the crumbling Merckle empire were said to be being examined by various players, while Opel, the German subsidiary of General Motors, apparently found itself in the sights of US private equity firm Ripplewood

Yet, very little comes out of the rumours, avid press speculation notwithstanding. In the case of Opel, for example, Austrian-Canadian trade buyer Magna emerged as the preferred buyer. Indeed, even the "private equity" interest was from listed investment company RHJ International, a spin-off of Ripplewood that is in fact, not a private equity investor. The real drama lies, as is so often the case, under the surface.

A case in point is PAI partners, which was rumoured a few months ago to be interested in HeidelbergCement, part of the Merckle empire, but is currently busy fighting to retain ownership of Monier Group, the roofing business it acquired from Lafarge at the height of the LBO bubble. A consortium of lenders and distressed investors, comprising Apollo Management, TowerBrook Capital and York Capital, have launched a bid to take control of the heavily-leveraged company, which is said to be buckling under its debt load, rumoured to be around EUR1.7bn.

The situation has echoes of TMD Friction, which had been owned by Montagu Private Equity but was taken over by opportunistic hedge funds that had initially bought into the company's debt - a sombre example of how the Monier situation could develop.

Indeed, while many in the industry are keen to talk up the potential of distressed opportunities in the coming months, these situations provide a timely reminder that in the current market, the hunter can quickly become the hunted.

Yours sincerely,

Mareen Goebel

Editor, Deutsche unquote"

Tel: +44 20 7004 7462

mareen.goebel@incisivemedia.com.