Private equity firm Blackstone is understood to be out of the contest to buy Arrium’s Moly-Cop, with the race for the $US1.1 billion-plus division understood to be a three-way contest between US-based KPS Capital, equity investors for a float and another unnamed bidder.
KPS is based in the United States and was revealed as a potential bidder by The Australian’s DataRoom last week.
Arrium’s voluntary administrator KordaMentha is meeting with lenders today to determine whether the Moly-Cop grinding media business will be sold to a prospective buyer or head to the boards as an initial public offering.
It is understood to be a close contest between a float and offers from the two suitors with competitive offers, which most assume would be over the $US1.1bn level.
Bankers working on the mooted listing of Moly-Cop were last week trying to cornerstone the entire book of Moly-Cop, with bids due on Friday to enable Arrium’s adviser Deutsche to determine whether bidders would likely pay more for the operation than an IPO.
Working on the prospective float are Deutsche, Macquarie Capital and UBS.
Bain Capital, Apollo, Platinum Private Equity and Blackstone were three buyout firms earlier thought to be in the frame to buy the business, but all are said to have fallen away from the pack.
This month, analysts from investment banks working on the IPO valued Moly-Cop’s market value between $1bn and $1.5bn and between $US1bn and $US1.4bn on an enterprise basis.
The numbers equate to a valuation range of between 6.7 and 9.5 times the company’s EBITDA, a premium to listed explosives maker Orica, which is being used as a comparable.
Moly-Cop sits within the listed Arrium business that collapsed into voluntary administration earlier this year with at least $2bn of debt.
Moly-Cop controls 49 per cent of the grinding media market in the Americas and Australasia.
It makes 86 per cent of its revenue from the resilient commodities of copper and gold and its earnings are stable.
It is on track to achieve annual EBITDA of $US147m in fiscal 2017, and net profit after tax and amortisation of $US59m, and in fiscal 2018 it is expected the company’s market growth will be 4.7 per cent as key new mines and projects come on stream.
Last year, attempts were made to sell the business through UBS and Lazard. Offers came in around $1.5bn from Platinum and Cerberus Capital Management in the final stages.
However, earnings have since fallen slightly.
An operation that manufactures steel balls used for mining, Moly-Cop has widely been viewed as the more lucrative part of the Arrium operation.
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